IFAs believe Scottish Amic-able has effectively pulled out of the pension market by ditching initial commission on new regular-premium pension business.
Pru-owned ScotAm says paying initial commission is no longer sustainable within the narrow margins of the post-stakeholder market and believes its rivals are pinning their hopes for future profitability on stakeholder becoming compulsory.
The move follows the withdrawal of Clerical Medical from the group market after its strategy to win high volumes of business backfired, leaving it with an admin crisis. It plans to return to group business early next year.
Pru says it wants to boost its single-premium and transfer business and sales of with-profits bonds and annuities. Initial commission will be phased out as the life office says it switches its attention to long-term profitable business.
While the Pru is positioning the move as working even more closely with advisers in areas of greater profitability, some advisers have given the development a cool reception.
Pentland Financial Planning principal Tony Pentland says: “Providers are dropping like flies. It was obvious this was going to happen even if you are a big player. Prudential have not done themselves any favours. This move muddies the waters for themselves in the IFA channel more generally.”
Roberts Clark director Ashley Clark says: “They have realised it is not profitable to write this business and are walking away. It seems like a strategic decision not to play with the ScotAm brand and will probably market everything through the Pru. They have not been winning the stakeholder war against Norwich Union and Legal & General.”
Prudential Intermediary Business distribution director Tony Kempster says: “Initial commission-based pensions business cannot be sustained in current market conditions. We must adopt a sustainable approach to profitability. My impression is that some of our competitors believe the Gov ernment will make contributions to stakeholder pensions compulsory but this also assumes that the Government will afford providers the luxury of the 1 per cent margin.”