Depriving trustees of access to the services of pension consultants is clearly not the DWP’s policy intention, but irritation at its tardy handling of the ban on consultancy charging is causing some in contract-land to ask some awkward questions about whether payments from any funds should be allowed.
The different regulatory regimes for occupational and contract-based schemes has been creating headaches for policymakers for years. Sometime things have gone in favour of contract-based pensions, such as the impending ban on short-service refunds. But the complete outlawing of a part of the advisory community through consultancy charging has left those affected feeling understandably sore.
No wonder then they are looking at their peers in trust-land with a envy that is bubbling up into resentment.
Most of the corporate advisory firms I speak to have moved on from commission and are shaping their businesses for a fee-based future, focusing on explaining their value proposition to employers and tailoring their services to meet their developing challenges.
But some life insurers and formerly commission-based advisers clearly still feel a residual anger that they are being treated differently to those operating in the trust-based world.
Now the contract-based world is ‘cleaned up’, it seems that trust-based pensions will be next in the firing line.
The DWP has said it does not see parallels between blended fund charges in trust-based and consultancy charges as a policy priority right now. Advisers operating in that area will hope that continues to be the case.
The presence of the trustee is the clear difference between trust- and contract-based pensions, and the argument that that level of oversight makes sure money spent out of the employees’ fund is only spent on things that benefit the member has weight. But in reality many of the things that are paid for out of trust-based members’ pots are exactly the same as those that would have been paid for through consultancy charging.
What the Office for Fair Trading’s investigation into all aspects of workplace pension will make of the payment of fees or commissions from members’ funds will make interesting reading. It may also leave contract-based pensions professionals enjoying a moment of schadenfreude.