CA Summit – Deductions from premiums for consultancy charges fall from favour

Post RDR, employers will be offered the choice of having the consultancy fee deducted from employees’ first year contributions or having the tariff taken from funds.
Whitfield told delegates at the Corporate Adviser DC Summit that: “Teedback from 100 employers showed the deduction of consultancy charges from contributions would be rejected, even though taking charges out of the fund would also be challenging as it would result in a massive charge if the fund was large and would not be suitable for smaller funds with low contribution levels.”
John Quinlivan, AEGON UK director of strategic accounts (business consultancy), said some level of co-ordination of the operation of consultancy charges between providers was needed. This need not fall foul of anti-competition legislation, he argued, and could be achieved by an industry working group. Quinlivan said: ” The challenge is how to balance making a commercial return and avoid adverse coverage in the red top press. If providers have several different billing systems, there is a danger of these being out of kilter with what employers were doing, for instance, whether fees increase in line with RPI or CPI.”
Companies are adopting different strategies for different sections of their membership, with global delivery service DHL, whose pension manager presented to delegates, paying the admin charge for actives, but not for deferreds.
Elsewhere providers are still mapping out how they can deduct consultancy charges, but most felt some form of decency level on consultancy charges would be required to protect provider brands from reputational damage. Paul Budgen, HSBC national business development managers, workplace retirement services said: “To avoid messy headlines, the industry needs some governance to keep employee contributions at 100%. It is appropriate to have some strong boundaries. If all advisers are fee-based, we have competition about service delivery, so you either get charged less, or you pay more and are provided with a better service.”