IFAs look set to be left out in the cold after the stakeholder price cap rise as leading product providers say the extra money will be spent on marketing rather than distribution.
The Government's move to raise the cap from 1 per cent to 1.5 per cent in a bid to win over the industry looks set to increase marketing spending but leaves little extra cash to offer incentives to IFAs to sell Sandler-style products.
The move was intended to boost marketing and distribution revenues but providers say there will not be enough left over to spare for IFAs.
Four pension providers have told Money Marketing they do not envisage paying much, if any, more commission to IFAs under the new cap. Some predict commission levels will stay the same for the new breed of products as for stakeholder pensions, which will not attract IFAs.
An IFA could expect to receive 40 to 45 per cent of Lautro rates. On a personal pension over a 25-year term with £200 monthly contributions, they would stand to earn £500-£600 in commission, with the majority coming up front.
IFAs have been left on the periphery of the stakeholder debate and are likely to remain there as most say they will not distribute the products if there is no extra commission.
Scottish Widows head of marketing technical Ian Naismaith says: “There will be more scope to pay more trail to IFAs but I would think most companies would be reluctant to pay more up front.”
Simply Biz chairman Ken Davy says: “You could treble the amount on marketing but if there is no one there to sell the products, that is wasted. The most effective way to use the extra income would be on improving the terms to IFAs.”
Michael Philips proprietor Michael Both says: “If IFAs are not getting anything more for higher charges directly, it does not change a thing.”