TUC concern over how RDR will affect members

The retail distribution review (RDR), which comes in at the end of this year, requires employers to pay upfront for financial advice, replacing commission-based fees.

The TUC is worried that when this happens, some employers will choose to pass on the cost of advice to their automatically enrolled staff.

Craig Berry, pensions policy officer at the TUC, said it is in discussion with the Department for Work and Pensions about the issue.

“Their response is that financial advice, which enables an employer to do more than the bare minimum, is to the benefit of members, so members should pay through consultancy charging or at least pay for the cost of that advice,” he said.

Berry described the subject as “one of the niggling issues on auto-enrolment that we need to get to the bottom of”.

“We absolutely accept that members of staff benefit from auto-enrolment, but it is the law, and employers shouldn’t necessarily need financial advice to comply with the law.”

He argued it is vital for the government to monitor the extent to which employers go beyond the bare minimum on pensions, so that when auto-enrolment and the National Employment Savings Trust are up for review, the way in which consultancy charging is being used can be clearly seen.

“If they are using it to go beyond the minimum then that’s not acceptable as it means members are paying for a decent pension provision,” he added.

Mark Baker, senior associate at Pinsent Masons, urged firms to be smart with their money by negotiating management charges with providers, but advised that companies needed to act fast and not leave the negotiation too late.

“If you’ve got a staging date in the middle of next year, you’ll want to know that your provider is happy to take on all your extra people,” he said.

“Some providers will either be reluctant to take on lower-paid workers, or they might charge proportionally higher fees – companies need to be geared up to negotiate over that.”