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Webb calls for 'urgent' review of consultancy charging

by William Robins on Nov 27, 2012 at 10:14

Webb calls for 'urgent' review of consultancy charging

Pensions minister Steve Webb has written to the Association of British Insurers (ABI) calling for an ‘urgent review’ of consultancy charging.

Consultancy charging takes money from employee contributions before they have been paid into a pension pot, directing them to the corporate adviser who helped to set up and administer a workplace pension scheme.

The Financial Services Authority has said consultancy charges can reduce contributions but only down to a minimum of 8%.

However there has been fierce lobbying for the ABI for the regulator to soften its stance.

Webb (pictured) said consultancy charging on qualifying schemes could be banned depending on the review’s findings.

Writing to ABI director general Otto Thoresen, Webb said: 'I am increasing concerned about the way consultancy charges might interact with automatic enrolment. 

'They should only be deducted from an individual’s pot where there is a tangible benefit to that individual. 

'I have received strong representations on this issue, including a number of calls for an outright ban on consultancy charging in qualifying schemes, and the FSA  has expressed concerns about whether consultancy charging in automatic enrolment schemes will be consistent with its rules.

The letter continued: 'My officials are ready to carry out an urgent review of policy and practice in this area....Once I am in possession of the facts, I shall be able to decide whether or not to permit consultancy charges to be levied on automatic enrolment schemes.'

14 comments so far. Why not have your say?

Man in Black

Nov 27, 2012 at 11:19

You couldn't make it up.

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Roydo

Nov 27, 2012 at 11:24

@ MIB. That is exatcly what they are doing!

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Dermot Brannigan

Nov 27, 2012 at 11:24

For a minute, I thought this was going to be an article on an 'urgent' review into the vast sums of money paid by govt departments to consultants. But no.

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EB Devil's Advocate

Nov 27, 2012 at 11:27

Now someone tell me the difference between a consultancy charge reducing the effective contribution rate to below the 8% banded earnings minimum and the NEST initial charge of 1.8% of contribution......double standards? Not ok for advisers to be paid their keep but ok for NEST as they need to repay a loan back to the Government?

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Mantra

Nov 27, 2012 at 11:27

MIB - But they frequently seem to

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Roydo

Nov 27, 2012 at 11:32

@ EB. Well, for a consultancy charge, it could be argued that en employee might actually derive some benefit from it.............

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DS

Nov 27, 2012 at 11:37

It is ridiculous that we are 5 weeks from the end of commission, yet this review is only just taking place.

I'm not surprised it's happening, just that it's happening now. We'll see how this pans out over the coming weeks, but I expect to see a ban on consultancy charging in some form or another. Whether thats simply on policies/schemes where the AE contribution s taken below 8%, or whether it's blanket unless advisers can evidence that they are providing advice to the members.

If it's the former it brings about the question 'which of the following 3 choices are you, Mr Employer, going to make?'

1. Increase your monthly contributions to the member to facilitate Consultancy Charging?

2. Pay a fee?

3. Do nothing and receive no advice?

The fourth option is engaging with the workforce to encourage them to increase their own contributions in order to pay the adviser. Good luck with that.

Of course if the employer chooses to they can make it part of the scheme rules that the members pay say 5% net instead of 4%, but that could be too much for some and you'd have more people opting out just because an adviser needs paying...

I should have been a chef

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DS

Nov 27, 2012 at 11:44

@ Roydo - unlikely! In most cases the member will get a direct offer pack at best and chucked in a default fund. The benefit would come because a GPP will be cheaper... unless of course you build in a Consultancy Charge., then it might not.

The employer gets the advice in most cases, not the member, so why should it be the member that foots the bill, unless they are getting pension surgeries, ongoing reviews etc...

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DS

Nov 27, 2012 at 11:44

@ Roydo - unlikely! In most cases the member will get a direct offer pack at best and chucked in a default fund. The benefit would come because a GPP will be cheaper... unless of course you build in a Consultancy Charge., then it might not.

The employer gets the advice in most cases, not the member, so why should it be the member that foots the bill, unless they are getting pension surgeries, ongoing reviews etc...

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Huntiams

Nov 27, 2012 at 11:47

The result of this is that larger firms that can afford to pay advisers directly will and smaller firms who can’t won’t receive advice.

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Julian Stevens

Nov 27, 2012 at 11:51

I've not been in the corporate market for 18 years now (and never regretted switching to personal lines), but might not one approach be to say to the employer:- Allowing for our consultancy charge, the total scheme contribution rate will be [say] 8.25%? Or is that too simple and practical?

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MPT

Nov 27, 2012 at 11:52

"Once I am in possession of the facts"

I love it, we have already started auto enrolment that eventually will impact on all workers in the UK.

We have a government calling out to professional bodies saying ask your members to help smaller companies ( Us IFAs)

You have the RDR saying you cannot give advice without direct charging on one hand.

Then you have a different rule for "Consultancy" yet to be agreed, and the FSA want me to announce my service offering in about the next month.

How can a small FA practice really come up with a real business plan? Political and regulatory interference has gone mad!

So if i advise on a scheme that is not a QWP I have one rule. If I advise on a scheme that is a QWP I have another.

I thought RDR was supposed to get rid of adviser bias. It will do when we just stop advising period.

This whole lot is half baked. It is not ike the regulators and polititians have not had plenty of time to get " possession of the facts" in all the consultations and other studies they have undertaken according to the accounts to the TSC.

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David V Henderson

Nov 27, 2012 at 12:34

Right then...come on..who was it? Eh?

Who was it that called Mr Webb.?

A number of calls he's had you know..not just one!

By January that number could be up to..ooo...four.

It's not on you know...he's a very busy man and the more you call the more he will have to..eh...consult...and gather facts...then, well, then you're really for it. Because he's going to show you some serious Tangible Benefit form that consultancy....that he didn't actually pay for...you did, but that is okay, because all your benefit will be Tangible.

So, as soon as he gets back from lunch, about 4ish, you're all getting Tangibled.

Sorry, but it is just another case of Carry on Government.

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Bob Donaldson

Nov 27, 2012 at 16:31

These guys beggar belief. I did an appointment yesterday evening yes 6.30pm to give some general advice. At the meeting the lady produced her booklet for the pension scheme which her employer is offering.

The scheme is run by Barclays who take 3% of the first years contribution and 0.5% of every subsequent contribution.

What advice is given. None a booklet with the usual choice of funds, adventurous, balanced and cautious or individual funds should you wish to choose carrying a higher amc.

Now what is the girl to do for advice. With 35 years to retirement if she goes into the wrong portfolio it is going to be more detrimental to her than paying any fees I might choose.

What planet do MPs live on, they expect everyone but themselves to work for nothing.

No wonder Nadine Dorris went off to the Jungle she wanted to get away from the idiots she has to work with.

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