The DWP’s announcement on commission, what does it mean for your scheme?

In March 2014 the Government announced a number of changes to the pension system to improve workplace pensions for employees. These changes affect both employer and employee to some degree, and the biggest change that will affect employers is the removal of commission payments to financial advisers.

In the past, many employer-based pension schemes were set up to pay commission at both scheme level and new employee level. This would cover things like scheme reviews, ongoing payments, new joiners and governance meetings. All of which could be covered by commission overall payments received in respect of the scheme. This is set to change when initial and trail commission are removed in November 2014 and April 2015 respectively. Payments will cease and most advisers will have to review the position with the employers they service.

In most cases, this will likely result in moving to a fee based retainer to cover the services which would have previously been covered by commission.

Employers affected by these changes need to revaluate the services they are receiving from financial advisers to make a judgement as to whether their fees are appropriate to the level and quality of services being provided.

Robert Simmons

Corporate Pensions Administrator