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11/12/2006: "Commission creep: what Sunday Times says "

ST has a story today on life companies 'offering commissions of up to 20% to advisers who sell their pension plans in a blatant bid for business post A-Day'. The article addresses a question left out in the piece last week on trail commissions. Who is at fault: the provider offering the incentive, the adviser taking it, or both? The article quotes spokesmen for each.

The article singles out the Pru as offering up to 20% initial commission on lump-sum pension contributions to its Flexible Retirement Plan. Scottish Widows and AXA are quoted as offering 15% initial commissions on lump-sum personal pension contributions. After A-Day, these can be large amounts - 100% of earnings up to £215,000.

Several providers quoted argue there cannot be any abuse because they require the explicit consent of the customer.

According to Marcus Price at Prudential: 'It is the adviser's responsibility to behave sensibly. I think there is potential for abuse within any remuneration structure. There is very little we can do as an insurer to prevent that happening: that is primarily the responsibility of the IFA'. So dangle away - it's not their fault if advisers take the bait.

According to Tom McPhail, head of pensions at broker Hargreaves Lansdowne: 'The insurers have a moral and a regulatory responsibility to treat their cstomers fairly. Offering 20% commission is not consistent with this responsibility.'

Alan Steel of advisers Alan Steel Asset Management is also quoted: 'I find these sweeteners obscene. They leave me speechless'.

What do you think? And what does the FSA think - they are the ones relying on Treating Customer Fairly as a set of regulatory principles to change industry behaviour.

Well done, ST, for giving this an airing.