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IFAs in warning that ban would hit pensions

IFAs have reacted angrily to research carried out for the ABI that calls for the abolition of indemnity commission.

Advisers are warning that the move is unwarranted as a ban on indemnity commission – the principal form of remuneration for regular-premium contracts – would hit sales of pensions and make selling regular-premium products increasingly difficult in areas where persistency is poor.

But the ABI says the industry must at least consult on abolishing indemnity commission because of a fundamental objection from politicians and the general public. It says indemnity is confusing.

Syndaxi Financial Planning director Robert Reid says: “People will have to restructure their business and this move will just recycle the same costs somewhere else. It will also hit the Government’s target group for retirement savings as they will not want to pay fees. Group schemes, in particular, where there is a lot of up-front cost, will be particularly hard hit.

Central Financial Planning director Ian Smith says: “People use indemnity commission to generate cash up front. The alternative would be a solely fee-based system and I do not know if clients are ready for that yet. Work paid for by a level or fund-based commission system simply will not generate the cash required.”

ABI head of regulation and strategy Francis McGee says:”I hope that IFAs join in this debate rather than have the regulator come back in two or three years time with something like the defined-payment system.”

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