Firms including Clerical Medical, Scottish Life, Axa and Standard automatically pay commission on a default annuity to the adviser who sold the original pension, provided they are still in business.
Legal & General, Aegon, Friends Provident and Norwich Union ask the client if any advice was given and if they say no, then no commission is paid to the adviser. Now Axa and Standard are following suit.
Standard head of pensions policy John Lawson says: “We are going to start asking the customer whether they have taken advice on the annuity and if they have find out who gave it and pay that adviser the commission.”
Axa spokesman Steve Folk-ard says: “We pay the holding agent whether or not advice was given on the annuity but we are phasing this out. We assumed in the past that advice was given but we will now check this.”
Friends head of public relations Peter Timberlake says retaining the commission on such policies allows the firm to offer a fairer rate to all its annuity customers.
Clerical and Scottish Life say they have no plans to change their policies.
Hargreaves Lansdown analysis shows that life offices and advisers pocketed up to £56m in the past year from clients who rolled over their pensions into default annuity products without any advice.
Pension analyst Laith Khalaf says: “There is no excuse for annuity commission to be paid to an adviser where he has not provided an ann- uity service. Arguably, insurers who do not pay out commission on retained business use this margin to support rates so this is a bit more of a grey area.”