Head of pensions Dave Lowe says a small number of broker consultants have been told to offer advisers initial commission on group pensions.
The test will end once Zurich has written a specified number of schemes but the firm will not reveal how many. It will decide on whether it will offer initial commission to the wider market. Lowe says: “We are not looking to write tons of this stuff. We are running a very small pilot and when we reach a review point we will debate whether it is in our interests and in the interests of consumers and advisers.”
The move follows Axa’s decision to pull out of the market last month. Many firms have moved away from initial commission for corporate pensions because of poor profitability of the business.
But Lowe says: “From our perspective, this business looks as though it could be profitable. We are looking at the profit models and whether we can deliver sensibly priced propositions to consumers. We think that this is something worth investigating.”
Lowe admits the market has a short shelf-life, given the FSA’s retail distribution review proposals. “We have half an eye on what is going on with the RDR. The comments made in the previous publication on the banning of factoring means this has a very short shelf-life in terms of what we do with it.”
Zurich has paid initial commission in the past but has not done so for some years.
Informed Choice joint managing director Martin Bamford says: “Maybe it has spotted a short-term opportunity in the market to capture a share but it is going against the tide. It is a shame really because in other aspects Zurich is forward-thinking.”