Just Retirement director Steve Lowe has slammed single-tie annuity distribution deals being arranged between pension providers and networks, warning they are likely to offer consumers a bad deal whilst being unsustainable for the network.
Last month, Money Marketing revealed that providers are paying significant amounts of money to distributors as part of long-term distribution deals ahead of the RDR. These included a proposed £2m, five-year payment from Aegon and Caerus for “sales and marketing activity to support our partnership”, although Aegon says the final deal was agreed on different commercial terms. The pair have a single tie pensions deal.
Lowe (pictured) says: “I am concerned that there is increasing evidence that networks planning restricted advice services are looking to sign single-tie agreements with providers ahead of the retail distribution review.
“Providers are keen to set-up single-tie deals because it guarantees distribution and networks, facing the loss post-RDR of sponsorships and commission, are attracted to extra revenues.
“But from the adviser’s perspective, being tied to selling products that are not competitive is a huge disadvantage, potentially choking off the oxygen of new business both adviser and network rely on to survive.
“It is important advisers are clear whether their clients could end up with poor value deals and understand the risk that could bring to their practice given increasing competition from comparison services.”
Lowe also says single-tie agreements run counter to Government efforts to increase the number of people who shop around for a retirement income.
FSA rules on adviser-charging under the RDR state that, from 2013, adviser firms can accept client charges but will not be able to accept “any other commission, remuneration or benefit of any kind in relation to any personal recommendation that they make or service related to it”.
Last week, Standard Life raised concerns about providers making payments to be part of a restricted advice arrangement and called for greater transparency.