Insurer Forester Life will stop paying advisers trail commission relating to the Children’s Mutual book of business from the end of this month.
The Children’s Mutual business, formerly part of the Tunbridge Wells Equitable Friendly Society, moved to Forester Life in May. As part of the integration, Forester Life has written to advisers saying it will not pay out further commission on Children’s Mutual policies.
In the letter, seen by Money Marketing, the insurer says it will instead pay out a non-negotiable lump sum of two years’ commission to advisers based on policies remaining in force until either policy maturity or 30 April 2016 – whichever is the earlier date.
The company declined to comment on the number of affected advisers, or how much it has set aside to settle future trail payments.
It says due to declining Children’s Mutual sales, the number of affected advisers is “not massive”.
Advisers have been informed that all payment of commission from the end of April will stop for the following Children’s Mutual products:
- Life, pensions and Holloway sickness business
- Child Trust Fund and Growing Up Bond
Network members will have to inform their network of the changes.
Speaking to Money Marketing, Forester Life chief executive Euan Allison says: “The previous life and pensions business of the Children’s Mutual is in a ring-fenced fund and therefore solely for the benefit of those policyholders. The commission payable to advisers was coming out of that ring-fenced fund, so we have done this for the benefit of the policyholders, as any advice they need to receive in the future under the RDR would require them to pay a separate fee.
“We therefore felt that it was wrong to continue to charge our customers renewal commission directly from this ring-fenced fund.”
Highclere Financial Services partner Alan Lakey says: “I am obviously not impressed.
“If we were to tell a consumer: ‘You have a contract with us but we are going to change the terms so that you are getting less than you were before because we can’, you can bet your bottom dollar the FCA would be knocking on our doors.”