Standard Life says it is not willing to shoulder the burden of offering unprofitable stakeholder busi-ness following Norwich Union's decision not to operate actively in the individual market and Axa's decision this week to target group schemes.
Standard's announcement that it could cut commission on unprofitable individual plans would effectively withdraw it from the low-premium mar- ket as it principally deals with IFAs. It comes two weeks after NU said it would focus on lucrative big group schemes rather than low-premium individual schemes.
Axa has demonstrated its intention to focus on group stakeholder this week by launching a dedicated administration support unit. It admits the unit will not be operational for individual business for at least another year.
Standard Life marketing director Barry O'Dwyer says: “If companies like Norwich Union abandon the individual market, we might have to change our commission structure to avoid us getting more of the unprofitable business in the market.
“We have no plans to change our individual stakeholder commission at present. But our commission structure is constantly under review and there is downward pressure on commission because of the way the market is developing.”
Axa head of pensions marketing Steve Folkard says: “We undertook a detailed review of the market and it became clear that there is not an app-etite among most IFAs for operating within the 1 per cent charge. There are those who can operate within 1 per cent but it is more profitable for us to deal en masse.”
Wentworth Rose managing director Philip Rose says: “We have an industry that is strapped for cash and we are coming to a crunch point. This is a real political problem because the industry is effectively pulling out of the market. When were the life companies elected to look after the poorer sections of the British public at a loss?” A Department for Work and Pensions spokesman says: “Over a million stakeholder pensions have been sold and, with 50 providers on the market, we still feel that stakeholder is delivering good consumer choice.”