On 14 September 2013, The Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2013 came into force. These regulations prohibit automatic enrolment schemes paying for third party or consultancy fees out of members’ pension pots or contributions where there is an agreement between the employer and the third party. This applies to both personal and occupational pension schemes providing money purchase benefits.
The regulations follow the government’s review of consultancy charges between November 2012 and May 2013, which found that existing measures to prevent advisers deducting high charges from members’ pension pots were inadequate. The consultation also found that consultancy charges disproportionately affected people who move jobs regularly. Overall, the review found that consultancy charges pose a significant risk to consumers and the ban was widely supported by members of parliament. In the government’s press release on 13 September, Steve Webb stated that:
‘My job is to make sure people get better pensions. So when people put hard-earned cash into a pension I am determined to make sure it doesn’t get gobbled up by charges. This ban will make the system fairer for anyone being automatically enrolled into a workplace pension.’
Currently, the ban does not apply to legally enforceable agreements between the employer and a third party that was in place before 10 May 2013. However, this autumn, the government is due to consult over whether to extend the ban to legally enforceable agreements in place prior to that date.