Norwich Union is slashing commission rates by up to 75 per cent on its pension products, saying the pressure of the 1 per cent regime is forcing it to cut costs.
It is cutting commission on short-term contracts but increasing commission on contracts of more than 20 years. Contracts of less than five years will see commission cut to a quarter of current levels while five-year to nine-year policies will have payments halved. But contracts longer than 20 years will receive 105 per cent of current rates.
NU is also axing renewal commission on pensions, leaving IFAs the option of fund-based commission only or a combination of initial and fund-based.
The company says the cuts have been forced on it by the pressure of making a profit under 1 per cent and is continuing to lobby the Government to raise the price cap. Director of pensions development Jerry Barnfield says: “The Lautro scale was designed before the 1 per cent charge cap. We are adjusting the Lautro scale so it is more appropriate – but that is not to say we are happy about it. This has been forced on us. All providers are in the same boat.”
Norwich Union this week unveiled a new £12m advertising campaign to promote the need for individuals to save more for a longer retirement. The TV and billboard ads will run from April. NU is also targeting more than 18,000 IFAs with a direct-marketing campaign.