Openwork could receive more than £15m from Partnership under the terms of a controversial single-tie annuity deal agreed last year, Money Marketing can reveal.
The arrangement, which was confirmed by Openwork in May, will see Partnership become the sole provider of conventional and enhanced annuities for Openwork
The contract requires Partnership to offer an annuity rate equal to the average of the top five on the open market.
Openwork will receive £8.25m from Partnership to support the development of a bespoke administration system as part of the deal. The system is designed to enable Openwork advisers to process business more efficiently.
In addition, Partnership will invest up to £1.4m a year for five years for ongoing services provided by Openwork. These include the provision of training and seminars, account management services and IT system maintenance.
Openwork propositions and marketing director Philip Martin says: “Without the expenditure on bespoke technology, processing illustrations and subsequent business would have been much more expensive – prohibitively so for smaller annuity pots.”
Martin says the network has decided to publicise the terms of the deal to counter “ill-considered comment” about the relationships between providers and advisers.
In October last year, the FSA sent a ‘Dear CEO’ letter to 24 providers and advisers warning against payments which “work around” the commission ban under the RDR.
At the time, the regulator said the payments could create a market distortion which gave some advisers an “unfair competitive advantage”.
Informed Choice managing director Martin Bamford says: “There is a risk that consumers will get a really raw deal from these types of arrangements, which are effectively commission by another name.”