FSA slams £500,000 GPP commission case
A £500,000 commission payment on a 1,000 member GPP has helped confirm the FSA that it is right to abolish commission on GPPs.
Defending the abolition of commission, the FSA has rejected arguments that consultancy charging will lead smaller employers to level down to Nest.
In policy statement 10/10, responding to the issue, the FSA said it was not swayed by the arguments put by some advisers that employers appreciate not having to pay for the services they receive.
The FSA also cited comments attributed to Towry Law saying that commission on a sample scheme might be £55,000,but the actual cost of advice and
services to the employer on a fee basis might be around £10,000 as evidence that supports the ban.
The FSA says it has given two formal opportunities to the pensions industry to provide detailed estimates of the cost of advice through CP09/18 and CP09/31, but had not been provided with any substantiated cost figures concerning the true cost of advice services on GPPs to employers, as opposed to the remuneration secured through commission. Respondents had however quoted commission rates in the range of 10 to 35 per cent of the first year’s GPP contributions.
The FSA policy statement says: “Two respondents to CP09/31 mentioned an example, hopefully extreme, of a 1,000-member GPP generating their first year’s commission of £500,000, despite the adviser only providing limited services to the employer and no advice to individual employees.