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Aegon: Dismissing AMDs could harm consumers

Aegon has warned The Pensions Regulator’s hardline stance on active member discounts risks damaging the private sector and could lead to members receiving less money at retirement.

In a statement to defined-contribution scheme trustees issued earlier this month, the regulator warned pension schemes it does not view the deals as either “fair” or “acceptable”.

TPR says it takes the same view of AMDs offered through contract-based pension schemes.

Aegon UK head of regulatory strategy Steven Cameron (pictured) says: “We are surprised that The Pensions Regulator has singled out AMDs as inherently unfair and we would welcome wider industry debate on this issue.

“Attempting to restrict the use of this approach actually makes it harder to deliver fairness. We are entering a critical time for workplace pensions and we need a thriving private sector alongside Nest.

“We need to allow employers and advisers to select what works for them and dismissing AMDs runs a real risk of worsening member outcomes.”

This follows accusations from TPR executive director of DC June Mulroy that the industry has been guilty of using AMDs to rip off consumers.

She said: “We have found that deferred members have been paying an awful lot more for nothing – there were no efforts made to find them and no efforts made to get information to them.

“Transaction charges in general have plummeted in the last 20 years but members do not seem to be getting any benefit from that. I think active member discounts have been seen too often and too easily as a way of making money.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. “I think active member discounts have been seen too often and too easily as a way of making money.”

    When it takes about 16 years to break even on these contracts I wouldn’t call that “easy” money.

  2. It sounds to me that a perfectly good product is being ruined by advisers setting deferred member (and therefore probably active member) charges too high, presumably to generate commission. If a scheme runs at 0.3% AMC rising to 0.6% for deferred members, AND they get timely and clear communications, there really can’t be an issue. But a deferred member charge set at 2 or 2.5% AMC where all parties conveniently fail to mention it is not good news. Nothing wrong at all with the product, just regulate the few cowboys properly.

  3. Suitable Offensive 28th October 2011 at 2:56 pm

    And this from a firm that can’t even administer this feature properly.

    I invite Mr Cameron to tell us whether AEGON has been able to get AMD working properly for individuals who convert to an individual pension after leaving service. Last time I asked your Customer Services function I was told it was not, and was being investigated just like the hundreds of other issues under the ‘Legacy Management’ remediation exercise.

    I suggest AEGON spends it resources on getting its systems right to provide the discount in the first place, before callling for debates on the matter.

  4. i couldn't agree more with Steven and huw 28th October 2011 at 3:05 pm

    the product is absolutely fine and actually very simple to communicate….it is also what employees expect….an employer negotiated discount.

    the tPR have much bigger issues to worry about, or should have

  5. @huw

    where does it say anywhere that advisers are operating schemes with a deferred member charge – to the best of my knowledge those life offices that have succesfully sold this product have set a cap on deferred member charges, pretty sure Scottish Widows capped the deferred charge at about 1.3% and Aegon 1.5% – in the same ball park as the governments flagship stakeholder charged products. I hear talk of these big charges but as someone active in the Group Pension market I’ve yet to see them – are they the fantasy of the regulator?

  6. Some of the comments on yesterdays article about AMD’s suggest that their features and benefits might not be fully understood by all. As long as there is a maximum inactive AMC cap, a transparent communication to leavers who are moving to an inactive rate, an option to retain their lower active rate by continuing a personal contribution and the gap between active and inactive rates isnt excessive then this feature both encourages members to fund for their retirment and boosts the eventual retirement fund. The debate should be about what is an acceptable AMD scheme basis rather than lambasting AMD schemes in their entirity. Either the TPR don’t understand there are some decent AMD type schemes out there or it has been poorly reported ?

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