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Annuity IFA in plea for commission sacrifice

Top annuity specialists are calling on fellow IFAs to forgo commission on

income drawdown to prevent a scandal.

The call comes after recent reports by the ABI and the PIA showing that up

to 16,000 drawdown policies were sold last year, with the average

commission paid to IFAs reaching 4.5 per cent while tied agents took an

average of 6 per cent.

Wentworth Rose managing director Philip Rose believes that such levels of

commission are putting clients at a disadvantage and altering a client&#39s

risk profile.

He says, for drawdown to be appropriate for a client, it must outperform

the return offered by an annuity. Six per cent commission immediately

places the client at a disadvantage because they have to achieve a

considerably higher growth rate

Rose says: “The scale of the commission being taken is not good for the

industry or the reputation of IFAs. To have remuneration which is out of

step with other professionals is unjustifiable.”

Annuity Bureau managing director Peter Quinton says: “Advisers should take

either a fee or rebate commission equal to the fee.

“It is especially dangerous for smaller pots as they will really struggle

for the investment performance just to recover the commission.”

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