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Commission can be better for pensions

Axa’s Simon Olive makes a strong case for advisers to move to a fee-based business model in the article, Fee spirit, (Money Marketing, May 5).

But he ignores one key aspect completely. For individual contributions to a pension plan, the commission-based approach is far more tax-efficient on a like-for-like comparison.

This is because the cost of the IFA’s services are effectively reduced by 22 per cent or 40 per cent – depending on whether the individual is a basic-rate or higher-rate taxpayer – by taking the costs from the product, for example, commission. Why would any individual want to pay by a fee in such circumstances?

Alasdair Buchanan

Group head of communications, Scottish Life, Edinburgh

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