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Commission deal for small pension pots

Aegon is offering flexible remuneration on annuities to encourage clients with smaller pension funds to seek advice.

The company says clients with smaller pension savings often do not get advice because the 1 per cent commission which is usually available does not cover the cost of advice.

Under its new scheme, the adviser and client agree a charge for advice which is then taken from the annuity as commission. The maximum rate of commission has been set at 3 per cent.

Aegon says clients benefit by getting the type of ann- uity which best suits their needs. It says that the gap between the best and worst annuity rates is commonly around 10 per cent.

At-retirement managing director Mike Douglas says: “Ninety per cent of annuity funds are below £50,000. Many advisers are unable to offer advice on a customer’s annuity options for the standard commission providers usually pay of 1 per cent.

“The only way for an adv- iser to be able to offer tailored advice for customers with small pension pots is to charge the customer a fee appropriate to the advice required. This cost would then be borne by the customer up front.

“By providing the option to increase commission to 3 per cent, Aegon is giving intermediaries the flexibility to offer advice on the options available and obtain a better annuity deal for their customers than would other- wise be possible.

“Consilium Financial Planning managing director Kevin Morgan says anything that raises awareness about the importance of the open market option is positive but providers could do more.

He says: “I am not sure if enhancing commission options is the best way to go in the current climate. Annuity business is very time-consuming because of the differing requirements from providers. They could do more to streamline and simplify the process so that there is a standard process across the board.”

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