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Standard rejects ABI’s bid to scrap indemnity

Standard Life says it does not see the need for abolishing indemnity commission, as proposed by an ABI study paper.

Standard Life managing director (marketing) Simon Douglas says he can see no reason why indemnity commission should not continue in its current form.

Norwich Union sales and marketing director Peter Hales says he backs the ABI’s decision to review whether indemnity commission is appropriate. He says he would like to be able to increase commission on pensions which would be made easier if the regulator clarified its position on RU64 to allow sales of higher-paying stakeholder busting advised pensions.

Clerical Medical sales director Graeme Riddoch says the new accounting standards make it difficult for life offices to pay indemnity commission because it is capital-intensive but he agrees with Douglas that up-front commission of some sort is needed for contracts such as pensions.

IFAs are concerned that the review is being used by life offices as an excuse for cutting commission across the board.

Douglas says: “I do not see the need for indemnity commission to go. If the client, adviser and provider are happy, I cannot see the problem.”

Hales says: “We back looking at the removal of indem-nity commission.”

Riddoch says: “We are puzzled as to what the ABI is up to as the contract is between the customer and the adviser and nothing to do with anyone else. The Government is keen to promote pensions to those who do not have them but as stakeholder showed, there needs to be up-front commission. The new accounting standards make life difficult for life offices paying indemnity.”

Hornbuckle Mitchell IFA Viv Belcher says: “I think providers are trying to cut the levels of commission they pay advisers and it would be nice if they would support us on this one. I do not think they know how tough it is for us.”

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