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Group pensions to avoid FSA legacy commission ban

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Group pensions are to avoid the FSA ban on legacy commission that will hit the individual market, Corporate Adviser understands.

That means commission can still be paid after the implementation of the Retail Distribution Review where new members join schemes or where existing members’ contributions are increased.
But legacy commission, defined by the FSA as additional commission payable under a contract signed before December 31, 2012 but as a result of an event that takes place after that date, will be outlawed in the individual market.
Some experts argue this could lead to individual pensions being sold on a group basis to get round the regulations.
Steve Jackson, group pensions marketing manager at Aviva says: “Our belief is this ban does not apply to group pensions. The FSA has already made clear that commission can continue for new members and increments, both in CP09/04 and in Policy Statement 10/10.”
John Lawson, head of pensions policy at Standard Life says: “It is incredible that it applies to individual pensions but not to group pensions. One of the reasons group pensions were brought within scope of the RDR in the first place was to stop advisers offering group pensions to employees. Now they are being exempted from part of the rules. This brings back the question whether IFAs should set up groups of pensions for their clients to allow them to get round this.”

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Readers' comments (2)

  • I'm glad John Lawson thinks this is a bizarre situation too. Its as if they have lost sight of the fact that the individual contracts inside a GPP are just that, "individual contracts". Extreme example, 10 man GPP set up pre RDR on a commission basis with 1000 new entrants post RDR. As I understand it they can be on a commission basis too.
    Not in the spirit of what I thought RDR was about.

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  • Dear Lord - a ray of sanity amongst the madness! Any advisers setting up 'groups of pensions' for their clients can be drummed out of the brownies. Simples. The rest of us who have spent donkey's years not taking indemnity payments and building up proper corporate portfolios can carry on the good work. Early retirement cancelled.

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