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Clawback extension to cut churning

Commission clawback periods on personal and stakeholder pensions are set to increase to five years as part of an industrywide bid to clamp down on churning, says Scottish Widows.

This would have a major impact on IFAs, with firms such as Aegon and Widows currently operating clawback periods of between 27 months and three years on personal pensions.

Widows head of pensions market development Ian Naismith says Norwich Union’s recent decision to increase the clawback period to four years on its individual personal pension is an indicator of a growing trend to prevent churning.

He says clawbacks could operate on a sliding scale, with more favourable terms for advisers that take less commission up front.

Last week, Prudential threatened to shun advisers that churn or report them to the FSA.

He says: “Clawback periods have increased to four years and will not stop there. They will increase to five years in the next year or two.”

Syndaxi Financial Planning managing director Robert Reid says: “If insurance companies provide a decent service and investment performance, then I have no problem. It will become more difficult to justify shifting business.”

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