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In the line of fire

Legal and General has kicked up a storm by launching a joint pilot study with Hargreaves Lansdown to look into the benefits of using customer postcodes as a risk factor in determining annuity rates.

Although the idea may appear revolutionary, Annuity Direct managing director Stuart Bayliss says it has been mooted in the industry for a while and he does not agree with the approach L&G is taking.

Bayliss thinks the provider should tackle this issue properly and give customers a significantly different rate according to postcode rather than just a few extra quid a year.

He says customers in poorer areas will get a better rate, which will leave less residual in the pot for those living in better-off areas who will get lower rates.

Norwest Consultants principal Harry Katz says this is a publicity stunt and will provide a very small annual difference to pensioners.

But Hargreaves Lansdown stressed that no one will be worse off in the scheme and says the criticisms are misguided and that the theory behind the study is sound.

Clerical Medical is second in the firing line this week for restricting advisers to taking commission on an indemnity basis on its pension products.

It does seem a strange move in the current anti-commission climate and in light of the Retail Distribution Review that Clerical should stop allowing customers to take commission on a non-indemnity basis.

Clerical says that very few IFAs were opting for non-indemnity commission so it removed this commission structure to simplify the process and says this new structure aims to reward persistency rates among advisers.

A spokesperson said that most IFAs prefer a single up-front commission payment – a rather controversial view at a time when many in the adviser market are saying they want to move away from this remuneration model.

And finally, Standard Life head of pensions policy John Lawson is third in the firing line this week over his calls for all providers to publish annuity rates.

Scottish Life, Skandia and St James¹s Place say that Lawson is missing the point after he named 11 firms that do not publish their annuity rates on the FSA’s comparative tables.

St James’s Place divisional director (pensions) Ian Price says that SJP does not provide its own annuities and has a tie-up with Prudential.

Price says it would be confusing for customers if it published Pru¹s rates under its own name and that it is always made clear when customers are sent a quote that they can use their OMO.

Skandia says it has an arrangement with Legal & General which is the default open market option and therefore it cannot quote annuity rates.

While Scottish Life head of communications Alasdair Buchanan says Lawson is missing the point and it is a “nonsense” to publish rates if you are not selling this business.


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