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RDR: Aegon slams factoring ban for group pensions

Aegon has hit out at the retail distribution review’s ban on factoring for group personal pensions, warning there is a major risk that scheme take-up could fall as a result.

The insurer says the factoring ban poses a considerable threat to saving and it challenges the FSA to consider whether the decision to allow commission on pure protection because of the wider benefit from consumers purchasing it should not also apply to the group pensions market.

Aegon head of business regulation Steven Cameron says: “The FSA is right to extend aspects of RDR to the corporate pensions market but it is taking a huge risk by proposing to extend its provider factoring ban to GPPs.

“The FSA has previously admitted that banning factoring is most likely to adversely impact modest and low regular savers. This is precisely the market GPPs serve.”

The FSA argues in its cost benefit that the ban will not necessarily lead to a reduction in take-up in new schemes, but Aegon believes there is a “major risk that take-up will fall”.

Cameron adds: “The FSA’s reason for not allowing factoring in GPPs is that it could reintroduce provider bias if different advisers offer different factoring terms. They say imposing standard terms ‘is likely to infringe competition law’.

But he says Aegon continues to believe a limited form of factoring, over a limited time period, could be introduced without reintroducing bias or competition concerns.

Cameron says: “Aegon believes the FSA should be giving more weight to the bigger issue of encouraging more people to save for retirement.

“Ultimately, introducing measures which focus on removing possible bias do not benefit consumers if at the same time they discourage saving.

“The benefit of more people purchasing protection appears to have been taken into account in the proposal to retain commission for pure protection. Might similar arguments not apply to allowing provider factoring in group pensions?

“We will continue to urge the FSA to reconsider its factoring ban across all regular premium markets.”


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Jeremy Pearson is Technical Support Manager with Canada Life’s ican Technical Services Team. Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland. Many parents value the standard of education offered by […]


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. More in sorrow than in anger, I can only say that the FSA has once again demonstrated that it – like the Banks it failed to regulate correctly – simply does not get it.

    They may earn sufficient to pay fees (although they probably think they know to much to need advice) but most people covered by the GPP market do not – and will never pay fees.

    Suggesting that employers pay is rather naive at a time when employers are already facing a 1% hike in NI contributions over the next two years.

    Without wishing to be rude, what planet are the FSA mandarins on?

  2. I wish to be rude – collectively the FSA is a stupid, overbureaucratic waste of space organisation out of touch with reality rather like this government…

  3. At first glance I’d agree, but for those who have actually read the report the reasoning does give compelling evidence to suggest that member take up isn’t actually increasing. GPP memberships have gone from 2.7M to 2.8m in 5 years to 2008, despite ABI member firms reporting 693k new memberships in 2008 alone.

    So if membership isn’t going up, how can you blurt out that the common folk won’t be served. If the only option is to pay a fee then the employers still have the responsibility to ensure a suitable scheme is in place.

    Obviously Scot Eq are going to be upset they’re trying to buy every bit of business going by offering what is being banned, if this goes through what do they have left?

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