COBS 6.1C Consultancy charging and remuneration

1. (1)

   1This section applies to a firm that gives advice, or provides services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme.

2. (2)

   Without prejudice to (1), this section does not apply to a firm that makes a personal recommendation to a retail client in relation to a retail investment product.

This section does not apply if the employer is outside the United Kingdom.

In this section ‘giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme’ includes:

1. (1)

   giving advice or assistance to an employer on the operation of such a scheme;

2. (2)

   taking, or helping the employer to take, the steps that must be taken to enable an employee of the employer to become a member of such a scheme; and

3. (3)

   giving advice to an employee, pursuant to an agreement between the employer and the adviser, about the benefits that are, or might be, available to the employee if he is, or if he becomes, a member of such a scheme.

Except as specified in COBS 6.1C.5A R,4 COBS 6.1C.5B R and COBS 6.1C.5C R4,3 a firm must:

1. (1)

   only be remunerated for giving advice, or providing services, to an employer in connection with a group personal pension scheme or group stakeholder pension scheme by consultancy charges or by a fee payable by the employer;

2. (2)

   not solicit or accept (and ensure that none of its associates solicits or accepts) any other commissions, remuneration or benefit of any kind in relation to that advice, or those services, regardless of whether it intends to refund the payments or pass the benefits on to the group personal pension scheme or group stakeholder pension scheme; and

3. (3)

   not solicit or accept (and ensure that none of its associates solicits or accepts) consultancy charges which are paid out or advanced by another party over a materially different time period, or on a materially different basis, from that in or on which the consultancy charges are recovered from the relevant group personal pension scheme or group stakeholder pension scheme.

3A firm and its associates may, except in relation to a qualifying scheme: 4

1. (1)

   solicit and accept a commission, remuneration or benefit of any kind in the circumstances set out in COBS 6.1C.5 R if:

   1. (a)

      the employer’s part of the relevant scheme was established on or before 30 December 2012; and

   2. (b)

      the solicitation and acceptance of the commission, remuneration or benefit of any kind was permitted by the rules in force on 30 December 2012; and

2. (2)

   enter into an arrangement under which the right to receive the commission, remuneration or benefit in (1) is transferred to that firm or its associate.

3If an employer chooses to appoint a firm to provide advice or services in connection with a group personal pension scheme or a group stakeholder pension scheme and that firm or its associate enters into an arrangement in COBS 6.1C.5AR (2), the firm must:

1. (1)

   before the arrangement is entered into, disclose to the employer that the transfer of the commission, remuneration or benefit of any kind will be requested by the firm or its associate;

2. (2)

   throughout the period during which the firm or its associate receives the commission, remuneration or benefit of any kind, provide the employer with an ongoing service; and

3. (3)

   as soon as reasonably practicable after it makes the disclosure in (1):

   1. (a)

      disclose to the employer the basis and amount of the commission, remuneration or benefit of any kind it expects to receive and any it has received; and

   2. (b)

      provide the employer with a description of the ongoing service it will provide to the employer in accordance with (2).

4In connection with a qualifying scheme, a firm may only solicit or accept consultancy charges from an operator of a qualifying scheme if the operator has confirmed that express agreement has been given by members of that scheme under COBS 19.6.4 R.

If the firm or its associate is the group personal pension scheme or group stakeholder pension scheme provider, the firm must ensure that the level of its consultancy charges is at least reasonably representative of the cost associated with giving the advice to the employer in relation to the relevant scheme.

A firm must determine and use an appropriate charging structure for calculating its consultancy charge for each employer.

A firm must not use a charging structure which conceals the amount or purpose of any of its consultancy charges from an employer or an employee.

A firm must disclose its charging structure to an employer in writing, in good time before giving advice, or providing services, to the employer in connection with a group personal pension scheme or group stakeholder pension scheme.

1. (1)

   A firm must agree with and disclose to an employer the total consultancy charge payable to it or any of its associates.

2. (2)

   A disclosure under (1) must:

   1. (a)

      be in cash terms7 (or convert non-cash terms into illustrative cash equivalents);

   2. (b)

      be made as early as practicable and, in any event, before the employer:

      1. (i)

         selects a particular group personal pension scheme or group stakeholder pension scheme for the benefit of its employees; or

      2. (ii)

         if applicable, reviews its group personal pension scheme or group stakeholder pension scheme arrangements;

   3. (c)

      be in a durable medium or through a website (if it does not constitute a durable medium) if the website conditions are satisfied;

   4. (d)

      if there are payments over a period of time, include:

      1. (i)

         the amount and frequency of each payment due; and

      2. (ii)

         the period over which the consultancy charge is payable;

      3. (iii)

         an explanation of the implications for the employer and its employees if an employee leaves the employer’s service; and

      4. (iv)

         an explanation of the implications for the employer and its employees if contributions to the group personal pension scheme or group stakeholder pension scheme are cancelled before the consultancy charge is fully paid.

When an employer asks a firm to provide advice to the employer’s employees, the firm:

1. (1)

   may make a consultancy charge for the cost of preparing and giving advice to each employee who chooses to accept his employer’s offer of advice;

2. (2)

   must not make a consultancy charge for the cost of preparing or giving advice to an employee who chooses not to accept the offer of advice;

3. (3)

   (if the firm prepares generic advice to be given to more than one employee) must not make more than one consultancy charge for preparing that advice.

5A firm must take reasonable steps to ensure that its representatives, when making contact with an employee with a view to giving a personal recommendation on his or her employer’s group personal pension scheme and/or group stakeholder pension scheme, inform the employee:

1. (1)

   that the firm will be providing a personal recommendation on a group personal pension scheme and/or group stakeholder pension scheme provided by the employer;

2. (2)

   whether the employee will be provided with a personal recommendation that is restricted to the group personal pension scheme or group stakeholder pension scheme provided by the employer or the recommendation will also cover other products; and

3. (3)

   that the employee will have to pay an adviser charge (if applicable) unless the representative is making contact pursuant to an agreement made between the firm and the employer under which the firm is remunerated by consultancy charging or a fee payable by the employer.

A firm must keep a record of:

1. (1)

   its charging structure;

2. (2)

   the consultancy charges payable by each employer and each of the employer’s employees; and

3. (3)

   if the consultancy charge for a particular service has varied materially from that indicated in the firm's charging structure, the reasons for that difference.