The Trades Union Congress (TUC) called on the government yesterday to ban employers from passing on the costs of taking advice from consultants onto staff pension pots.
Though legal, consultancy charging is an additional charge on top of those already levied by pension providers and TUC send a letter to pensions minister Steve Webb in which it is asking for him to use his powers to cap the charges and/or outlaw consultancy charging.
As the first set of companies need to enrol their staff from October onwards, many employers are now seeking help from external consultants to ensure that they are meeting all their duties.
Large employers appear to be absorbing the costs of external advice but some medium and small employers are planning to recoup these costs by calculating them through to savers.
The Department for Work and Pensions (DWP) recently confirmed the compatibility of consultancy charging and auto-enrolment, following confusing guidance issued by the Financial Services Authority (FSA).
The FSA initially suggested that passing on fees for advice could lead to employers failing to satisfy rules on minimum contribution rates, which could lead to fines from the Pensions Regulator.
However, DWP subsequently explained that this only applies where fees are paid before contributions enter an individual's pension pot - and therefore consultancy charging is lawful. Whether or not staff will appreciate this distinction is highly debatable, says the TUC.
TUC general secretary Brendan Barber said: "It is completely wrong that staff who pay in auto-enrolment pensions should have to meet the employer's costs of making sure that they obey the law. This is a cost that should fall on the business as a whole.
"Particularly in low-paid sectors where staff change job frequently, those unlucky enough to work for employers using consultancy charging could find a big chunk of their pension going to consultants, rather than to provide retirement income."
"Auto-enrolment is a huge advance and the TUC is a strong supporter, but we worry that consultancy charging will sour its introduction. We applaud pension schemes such as NEST who have said that they will not implement consultancy charging."
Read the full text of the letter to Pensions Minister Steve Webb here.
First published 31.07.2012
azeevalkink@wilmington.co.uk
