Hargreaves Lansdown is calling on The Financial Conduct Authority to ban commission on non-advised annuity sales to protect the reputation of the post-RDR pension market.
The deals will see customers at the two providers referred to the non-advised annuity shopping around services as they approach retirement.
If they choose to buy an annuity through either service a commission payment from the selected provider will be deducted from the client’s pension pot.
Hargreaves Lansdown head of pensions research Tom McPhail says the FCA should ban commission on all annuity sales to avoid accusations the market is not transparent.
Hargreaves offers a non-advised annuity shopping around service and is paid through commission from providers.
McPhail says: “There is a good level of transparency and clarity around distribution costs and charges and the industry is making progress towards giving customers good value on annuities.
“The problem is for as long as the commission system exists, there is a risk people will perceive there are charges they are not being told about.
“It is an issue of perception more than reality, but we have to address the perception because it is potentially damaging.
“From our perspective the net outcome to the investor would be the same because our charge would still come off the top of the pension pot, but it would be cleaner.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “The reputation of the industry is fragile and retaining commission on non-advised sales could potentially harm that reputation.
“The other big problem is you will have a lot of people who do not take proper financial advice who end up buying a pension which doesn’t meet their needs.”
Annuity Direct chief executive Alan Higham says the Now: Pensions deal will see clients charged a “variable” commission, meaning all customers pay roughly the same amount for the service.
He says they chose this approach because annuity providers’ systems struggle to process business written on a non-commission basis.
The FCA declined to comment.