The Government has announced plans to tackle high and inappropriate pension charges.
Its first action will be to ban consultancy charges in automatic enrolment schemes, because the Government found that existing measures to prevent advisers deducting high charges from members' pension pots are inadequate.
The Government also plans to publish a consultation this autumn on the introduction of a cap on default fund charges in defined contribution (DC) schemes, in light of a forthcoming Office of Fair Trading (OFT) report on the workplace pensions market.
The Department for Work and Pensions (DWP) has also published the final draft of the Pensions Bill, which sets out plans for a flat-rate state pension and will introduce a new statutory objective for the Pensions Regulator.
Pensions minister Steve Webb said: "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.
"That is why we are banning consultancy charges, where scheme members end up paying for advice given to their employer. In addition, the OFT is investigating the whole workplace pensions market and we will act promptly and vigorously later this year in the light of their findings."
The ban will apply to occupational and personal pension schemes.
Joanne Segars, The National Association of Pension Funds (NAPF) chief executive, said: "Excessive consultancy charges can be a serious problem and we are concerned about them, but a blanket ban is too simplistic.
"Employers should not be allowed to pass on charges for advice that does not directly benefit the saver, such as guidance on complying with auto-enrolment laws.
"But sometimes savers can benefit from the advice that comes with these charges. They may find that their pension is better governed and that they get stronger communications about their savings."
Others within the industry voiced their concerns about the Government's plans to ban consultancy charging in automatic enrolment schemes.
Ewan Smith, managing director of Scottish Life, the pensions specialist business of the Royal London Group, said: "We are very disappointed by this announcement as we believe it will undermine the success of automatic enrolment.
"The DWP is hugely undervaluing the importance that advisers have in making automatic enrolment a success. All the research and experience we have in the SME market tells us that employers require professional support in meeting the challenge of automatic enrolment.
"Equally we know that many employers and consumers will resist paying fees. This is why we believed consultancy charging had an important role to play in delivering the combined policy objectives of both RDR and automatic enrolment. The withdrawal of adviser capacity from the market is the risk that DWP seem prepared to run."
The NAPF has welcomed the Government's announcement of a consultation on capping default fund charges in DC schemes.
Segars said: "Charges have been a big concern for some time. People have to be able to save without worrying whether their savings are being unfairly eaten away. So the Government is right to be looking into this.
"Capping charges altogether is one option, but to really ensure that savers get the most bang for their buck, the Government should take more radical steps to change the structure of the pension market."
First published 13.05.3013
monique_simpson@wilmington.co.uk
