Full marks to pensions minister Steve Webb for nipping in the bud the controversial practice of consultancy charging.
The Department for Work and Pensions’ decision to ban use of the practice in auto-enrolment schemes does not come as a surprise, given the concerns Webb has consistently aired since his letter to the Association of British Insurers (ABI) over the issue last year.
The ABI has resisted the move, arguing that the ban could reduce employers’ access to advice. But in doing so, it is using the same misguided arguments employed to oppose the commission ban.
It is overlooking the bigger issue of consultancy charging provoking public disenchantment with financial services as savers would see their money eaten up by the cost of advice provided to their employer. That would have caused much greater damage to the standing of auto-enrolment advice.
With the implementation of the ban, employers, rather than employees, will be paying for the auto-enrolment advice they need. As it is employers’ obligation to auto-enrol staff, it is no different from them paying for their payroll services, as pension expert Steve Bee has pointed out.
It is those advice firms confident in their offering which will command the fees that employers will now be paying out of their own pocket. As a number of new model advisers gear up to enter the auto-enrolment fray, Webb has just offered them a boon.