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March 11, 2019
Consultancy charges for automatic enrolment pension schemes will be banned under new rules recently unveiled by the Government.
Following a review, the pensions minister Steve Webb has announced that employers will be prohibited from passing on consultancy charges to employees joining an auto-enrolment pension scheme.
Under the current rules, consultancy companies can provide advice to employers on which type of pension scheme to use, but their fees are then deducted from employees’ pensions pots.
Experts have warned that these fees may be ‘disproportionately high’ in the early years and, in some cases, they could reduce an employee’s first year’s savings by 50%.
‘With millions of people taking up pension saving for the first time under automatic enrolment, we have to give people confidence that they will get good value for money,’ said Mr Webb. ‘That is why we are banning consultancy charges, where scheme members end up paying for advice given to their employer.’
Tim Jones, chief executive of Nest – a pension scheme for automatically enrolled workers – said: ‘We were concerned that consultancy charging could have been detrimental to specific groups of customers and, more generally, damage the reputation of automatic enrolment. We welcome that potential being removed.’
The Government has also confirmed that it will be consulting on a cap on other pension fees later this year.