With auto-enrolment into workplace pension schemes just around the corner (the largest employers will start enrolling staff in October), the features of the schemes into which workers will be automatically enrolled continues to receive scrutiny.
One of the difficulties, however, is that we are far from certain about what all of the schemes used by employers for auto-enrolment will look like, especially in terms of charging structures. The introduction of automatic enrolment is coinciding with the implementation of the Retail Distribution Review (RDR), that is, new Financial Services Authority (FSA) rules which will ban commission-based fees for advice. The implications of this for newly enrolled pensions savers are as yet unknown, but could be hugely detrimental to attempts to increase saving rates among low-to-median earners.
This is because so-called ‘consultancy charging’ is set to take the place of commission, at least for some workplace pension schemes.
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Image: Neil Jones