End arbitrage between corporate pensions, says Friends
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Friends Provident has welcomed the introduction of consultancy charging in the corporate pensions market but is calling on the FSA to take further action to remove significant differences between occupational and contract-based schemes.
The firm says yesterday’s RDR paper indicates that the FSA has identified the potential for arbitrage between occupational pensions and contact based pensions.
Friends Provident says the FSA, the Department for Work and Pensions and the Pensions Regulator must work together to create a true level playing field.
UK corporate director James Ward says: “The new charging structure outlined by the FSA is laudable and will finally remove commission bias from the sale of contract based pension schemes.
“We welcome the strong intention to create a level playing field between occupational and contract based schemes by banning commission for occupational pension investment products.
“This helps to avoid a situation where new regulation encourages employers to move back to occupational schemes for all the wrong reasons.”
Ward adds: “But we need to go further to create a truly level playing field between different types of scheme.
“For example the rules on refunds of contributions in the first two years will become a more important factor for employers once auto-enrolment is implemented.
“New regulation puts more focus on these differences and regulators need to take co-ordinated action to ensure customers’ best interests are protected.”
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