Product providers are unlikely to be still paying up-front indemnity commission on group pension business by the end of the year, according to John Lawson.
Speaking at Financial Services Scotland in Glasgow last week, Standard Life head of pensions policy Lawson said advisers relying on this market are playing “a dangerous game”.
He said if one big provider pulled out, the market would quickly topple and no one would be interested in picking up the scraps of unprofitable business left over.
Lawson said Clerical Medical’s recent withdrawal from the market was not enough to make a big difference but emphasises the problems in the market.
He said standard group business can take as long as 22 years to break even or 40 years to make a decent return.
He said: “If one big provider comes out of this market, the whole thing will topple very quickly. Nobody wants to remain in it picking up the dregs of loss-making business. If this market is still around at the end of this year, I will be very, very surprised.”
Hornbuckle Mitchell director Neil Marsh said: “Clerical was a wake-up call. IFAs have to be very careful where they place business as providers move like a herd to pull out of unprofitable areas.”
See Conference Reports – Financial Services Scotland
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