DWP head of personal accounts reform David Haigh was unable to explain where the Department stood on the effect banning commission in favour of Consultancy Charging might have on employers leveling down to Nest when quizzed on the issue by Corporate Adviser. A response was sent out more than two weeks later, which did not address the risk of a reduction in pension saving through the workplace that could flow from the outlawing of commission beyond reproducing the FSA’s line on the issue.
Pensions campaigner Dr Ros Altmann says the lack of a clear view from the DWP on the FSA’s proposals shows a lack of joined up thinking in thegovernment. She has also thrown her weight behind calls for a rethink on the way commission is being replaced by Consultancy Charging.
Altmann is concerned that from 2012 employers will level down to Nest, paying just 3 per cent of band earnings, rather than the 3 or more per cent of full earnings that is typically paid on schemes set up through advisers paid through commission.
Altmann says: “This lack of awareness does not surprise me because everyone at the DWP is on final salary pensions and they don’t understand what is actually going on. We want to avoid employers leveling down en masse into Nest because that will make pension provision worse. It would be better to allow commission to be paid as long as it is explicit, because you have got a sophisticated purchaser, unlike in the individual market.
“There is definitely a mindset in the FSA, DWP and Treasury that advisers are there just to line the pockets and they haven’t given though to to what the consequences could be for leveling down into Nest. If the Government wants Nest to succeed then maybe it has a vested interest in leveling down, even if its not in the consumer’s interest.
“Employers should also be being encouraged to look at other benefits, looking at Isas and pensions together. That is impossible through Nest. We need to avoid dumbing down into Nest as much as possible.”
The DWP says it would be inappropriate for it to comment on the matter as the issue is under consultation with the FSA.
