Webb, told delegates at the Corporate Adviser DC Summit that he wanted to see ’value for money’ charges and that the Government would act to defend auto enrolment’s reputation in order to “make the conversation positive.”
“Auto enrolment is like a Ming vase – precious but fragile” He said some of the scare stories around auto enrolment have been overdone. New providers arere coming in with an AMC similar to Nest at 0.5% a year.
Michael Whitfield of Thomsons Online Benefits asked the minister who would advise pension schemes going forward and how they were going to be paid. Webb responded:” Our default fund guidance is such that those without advice do well enough.”
When asked whether consultancy charges should come out of employee contributions or the fund, the Minister said that if there were “screaming headlines” that this was taking a big chunk out of charges, the government would consider taking action.
With providers and intermediaries talking about taking more than 1% in consultancy charges, Webb said: “If people are getting ripped off, we may take action. We are looking at charges where people are being auto enrolled. If there are charges which could generate bad headlines for auto enrolment, providers are likely to face a challenge.”
The Minister said: “The single greatest challenge for employers is getting workers to contribute beyond the minimum and to get the message across that 8% is not enough. It is a difficult conversation that we need to start having. The question you should ask of employers is, ’do you care about the welfare of the people who work for you?”
Elsewhere in his speech, Webb said that last minute amendments to the Pensions Bill would avoid the problem of ’piddling pensions’ and that workers would only have to auto enrolled if they were earning enough to pay tax.
This, together with the three month waiting period, and easements on certification meant that auto enrolment “is as gradual as you get and the changes will save firms £175m a year. The model was to set the state pension above means tested benefits so that workers would not be disincentivised from saving.
“One in five of the UK population will be auto enrolled in the next five years,” he said.
He confirmed that auto enrolment will definitely go ahead from October 2012 as planned and that there would be changes to the increase in older women’s state pension age.
