Friends Provident director of UK corporate James Ward says he “would not want to be a shareholder” in one of those companies as he does not believe that offering such high commission rates provides long term value to the business.
Friends Provident today reported a 26 per cent drop in group pensions sales, down to £310m over 2009 from £423m the previous year.
Ward says: “Our chief financial officer has described it as a ’buy-now-while-stocks-last’ effect. We know that with the retail distribution review coming in 2012-13 that commission in this market is going to end and we celebrate that.
“We do not believe it is a sustainable business model for anybody and that is why we pulled out of that market in 2008. There are at least three big players still paying high rates of unfunded initial commission and the FSA made clear in its consultation paper, that if you look at market share the companies that have moved forward are those ones that are paying high commission, so they are buying business.
“But, I have to say I would not want to be a shareholder in one of those businesses as I don’t believe they are getting good returns on it.”