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‘Stop the gravy train of high commission’

Leading industry figures have called for an end to the “gravy train” of high commission and condemned firms for paying massive up-front rates with no clawback.

Delegates at a Money Marketing pensions round table said some providers pay 7 per cent commission on single-premium pension business with no clawback.

Hargreaves Lansdown head of pensions research Tom McPhail said: “Every time you think the ridiculous gravy train has to hit the buffers, someone else comes along and says we will give you big bags of money with no commitment. Providers and IFAs are both guilty of perpetuating this practice.”

Richard Jacobs Pension & Trustees director Richard Jacobs said FSA chairman Sir Callum McCarthy’s recent attack on the industry for churning was a clear warning sign that the regulator will introduce drastic measures to protect consumers if the industry fails to find a solution.

But Standard Life head of pensions policy John Lawson said it is insurers, not consumers, that are losing out from churning and that the Office of Fair Trading could intervene if the FSA interfered in market pricing.

He said: “It is financial madness for some insurance companies to pay 5, 6, 7 per cent on single premiums with no clawback. The market will shift this business as quickly as it gets away with it.

“The big problem is that insurers are not understood by the City. It will only understand when profits start fall- ing, which is becoming a feature this year.”

Round table reports, p22-23

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