So here we are – over two years into the RDR and yet still debating the rights and wrongs of commission, and whether it has a place in the new world of pension freedoms.
It is bizarre that we find ourselves in this position. The driving force of the RDR was getting rid of bias, and the influence commission played in dictating consumers’ product choices. This applies as much in the retirement space when it comes to non-advised annuities as it does in the wider retail investment market.
Money Marketing reveals this week that both the Conservatives and Labour have non-advised pension products in their sights: the Tories in the form of a commission ban on non-advised annuity sales and Labour as part of its retirement products review.
There are two issues at stake: tackling commission on non-advised annuities and how the non-advised drawdown market sits in the new pensions landscape.
Warnings about both have been gathering momentum for the last 18 months, particularly from the influential Consumer Panel. It has warned not just about the huge disparity in commission between non-advised annuity services but also the dangerous prospect of a growth in non-advised drawdown sales.
Firms offering non-advised annuity sales have, unsurprisingly, risen to their own defence. They argue those with smaller pots would be unfairly hit by a ban on commission, and that people understand that non-advised sales are not provided for free.
But while that may be the case for some customers, that is not necessarily the case across the board. It was not that long ago that Key Retirement Services removed claims that its non-advised annuity service was “free” from an online advert.
With all the different advice labels being bandied around at the moment, I would question whether consumers truly understand the difference between advice and non-advice, let alone the nuances of the different charging structures and the very real impact this can have on their retirement income.
At the same time as non-advised annuity services are coming under scrutiny, the rules around non-advised drawdown could also become tougher under Mifid II.
What we have is a pincer movement from politicians on one side and regulators on the other closing in on non-advised sales. And when you have UK and European policymakers working in tandem, the one thing you can be sure of is market reform.
Natalie Holt is editor of Money Marketing. Follow her on Twitter: