Friends Life will reduce the yearly management charge for 100 investors in its Melbourne Life Company Bond following its decision to stop paying trail commission on the product.
Last week, Friends Life confirmed it will no longer pay trail on the Premium Select Bond and Melbourne Life Company Bond, both of which are closed to new business, from October following a change in administrator.
The provider will not rebate the trail back to the 700 Premium Select Bond investors and instead plans to “reinvest” the money in its own business.
However, the 100 people with money invested in the MLC Bond will see their yearly management charged reduced to reflect the removal of trail commission.
A spokesman says: “Stopping the payment of ongoing commission is permitted under the Friends Life terms of business. It is not a decision we take lightly and we have carefully considered all of the options before reaching this decision.
“For the large part, as a result of commission no longer being paid on these bonds, the money will be re-invested into the business and will contribute towards the ongoing programme that ensures improved customer experience – for example making improvements to customer communication material and speeding up resolution of customer queries.
“However, on the smaller number of 100 MLC Bonds, the policies are set up in a way that the yearly management charge changes to reflect the fact that the trail commission is no longer being paid.
“Customers that have an MLC Bond will therefore see their YMC reduce in line with the amount of trail commission currently being paid. The Premium Select Bonds are structured differently and changes to systems required to alter the YMC are not commercially viable for the business.”
The decision to stop paying trail has provoked anger from advisers, with Informed Choice managing director Martin Bamford branding the move “indefensible”.