The Department for Work and Pensions (DWP) has clarified the way in which consultants are allowed to charge for setting up group personal pensions for auto-enrolment.
An update from the Financial Services Authority issued last week said that consultancy charges could not be taken from contributions when employers were paying only the minimum contribution, as contributions must meet the statutory minimum net of charges.
From this wording, some consultants were concerned they would not be able to take fees via adviser charging at all, leaving them with just the option of up-front payment from the employer.
However, the DWP has confirmed that although consultancy charges cannot be taken from contributions if they reduce the value of contributions to below the legal limit, charges can be taken from an employee's pension pot once the money has been paid in.
A statement from the DWP said: "A qualifying scheme is one under which the contributions required to be paid to the scheme must be equal to or more than 8% of the jobholder's qualifying earnings.
"If the scheme does not meet this requirement, for whatever reason, including allowing a deduction to be made in respect of a charge before the contributions are paid over, then it would not be a qualifying scheme.
"Charges can be levied on pension contributions once they have been received by the pension scheme. This a common approach used by pension schemes currently. The Pensions Act 2008 contains a reserve power to make regulations that exclude a scheme from being a qualifying scheme if it levies charges for something other than pension benefits which exceed a prescribed amount."
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