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Standard slams NU’s stakeholder commission hike

Norwich Union’s stakeholder commission hike has come under heavy criticism from rival Standard Life.

The Edinburgh-based insurer says it will not copy NU’s move, which saw it double commission on individual single-premium business and quadruple it on regular-premium contracts.

Standard Life says it will not write business which takes so long to make a profit.

Managing director, marketing, Simon Douglas claims NU’s commission increase is a short-term measure to maintain market share. He believes there is a real danger that advisers could build their business around remuneration at the current levels.

He adds that, even with the rise in the charge cap, NU’s commission rate of 40 per cent of Lautro plus uplift means a typical contract will have to remain in force for nine years to cover its commission costs, let alone cover NU’s expenses.

NU, along with Standard Life and Scottish Equitable, cut stakeholder commission last autumn as it was felt that levels were unsustainable. Clerical Medical raised its commission at the same time in a bid for market share and, recently, Legal & General followed suit, albeit from a low base.

Scottish Widows says it has no plans to raise commission in response.

Douglas says: “The 1.5 per cent charge makes no difference – even Deloitte said this in its report to the Treasury. It is madness and the danger is that IFAs are led to believe this is a sustainable change in commission rates.”

NU head of pension development Iain Oliver says: “We thought it was necessary because basic advice has not taken off and we are responding to feedback that advisers want a competitive product from NU.”

Hargreaves Lansdown head of pension research Tom McPhail says: “We are back to the arms race we had in 2001 and it is hard to believe insurers will do that again.”

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