Steve Herbert, head of benefits strategy, Origen
YES. Whilst on the face of it, the aim of removing commission looks positive from an employee perspective, it does however ignore the reality that many employers remain hugely resistant to adding adviser remuneration to their already significant costs in sponsoring and running the pension scheme. Add the impact of the recession into the mix, and it seems likely that this change will have a negative impact on the number of quality pensions schemes established.
For those employers that are unwilling, or unable, to meet the extra fees, one viable option would appear to be the ’adviser charge’ model that insurers are now offering, whereby the commission paid is directly subsidised by cancelling the value of early contributions, so at the end of year 1 the employee may have less fund value than the contributions paid. Whilst this route does mitigate the immediate concern of the employee (i.e. how to meet the extra advice cost from take home pay at outset), it begins to feel more like charging models pre-Stakeholder. This may be difficult for employees to accept, and makes the pension saving decision much harder.
Alasdair Buchanan, group head of communications, Scottish Life
No. But what it will do is reduce the number of group pensions that are switched between providers, where the new provider pays initial commission to secure the business.
In fact there’s every reason to believe that the RDR changes will help to increase the number of GPPs being set up by advisers.
The clear objective of the remuneration part of the RDR reforms is that providers will no longer have any involvement in deciding how much an adviser is paid for the services they provide to their clients.
This must be great news for advisers; and for their clients. Advisers will now be able to agree a proper level of remuneration for the services provided, rather than having to accept whatever a particular provider is willing to pay, irrespective of the quality or extent of the services the adviser has provided. And customers will still have the choice of paying a fee or having payments made from within their pension plan.
Providers will no longer be able to compete on the basis of how much commission they will pay. Instead, competition will be focussed on the overall quality of a provider’s proposition – product, investment and service.
Steven Cameron, business development manager, Aegon
Yes. There are two kinds of consultant charging – one on a matched basis, which is what the FSA are currently proposing, and the other on a factored basis which is what we want to see.
Under the FSA’s approach, if an adviser wants £1,000 up front, it has to be deducted on day one. We are lobbying for the right to be able to pay that on day one and spread it over five years, so that members do not see the money coming out on day one. Otherwise we get a return to nil allocation rates, and that will put members off joining. This will be a real danger to the GPP market.
Some employers will be prepared to pay a fee, but others won’t want to, and that is where the problem lies. This is contrary to government policy.
Would advisers be prepared to wait five years to receive their remuneration? This depends on the advisers’ willingness to be paid a fee over time. This would create cashflow problems.
There is a major risk this will damage the GPP market.
