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.'