By now, I would expect many of our visitors to this blog to at least have a bluffers knowledge of the Retail Distribution Review (RDR), and the possible impact for employers with regard to corporate pension provision, and the costs associated with running such schemes.

For those that are not up to speed on this subject, then it might be worth looking back through the back-catalogue of posts on this blog re the RDR, starting with my original post back in November https://www.jelfgroup.com/blog/2010/11/recent-employer-survey-representation-and-rdr/

For the corporate pension market and advisers there are two main issues here. One is that advisers must be qualified to talk about their chosen area of expertise. This is clearly not something that I intend to argue with as, ultimately, it can only be a good thing for all sectors of the industry and may help avoid some of the miss-selling issues that dogged the industry in the late 1980′s and early 1990′s.

The other, and much more significant, impact is that traditional ‘factored’ commission payments for mono-charged pension schemes (so that’s typically a Group Stakeholder or Group Personal Pension Plan) are likely to be removed for new schemes from the end of next year (yes, it’s that close now). Now this is a problem, as many employers rely on commission to offset some of their costs in running a pension scheme. Responsible employers are already funding significant levels of employer pension contribution, and picking up significant admin and communication costs also, so offsetting some of their professional advice costs through commission seems to me a fair balance to provide employees with a retirement income.

If, as RDR intends, factored commission goes, employers will be left either facing a higher bill for running a company pension scheme, or commission payments in another form which may not be as attractive as the current model (a subject, incidentally, I will speak more on at future events).

So, will this happen at all? I still think yes, but there is finally some significant rumbles around this. The attached link includes quotes from me for Corporate Adviser’s ‘Big Question’ on this subject (along side a picture of myself which Corporate Adviser do insist on using, even though it looks like I have just been slapped by Mike Tyson!).

https://www.moneymarketing.co.uk/channels/corporate-adviser/the-big-question/1025047.article

You will note that my views appear the odd one out. However, and importantly, it’s worth highlighting that the views ranged against me are from an insurance company (a provider) and an adviser fully owned by another provider. You will see in my comments that I say:

‘It is also no surprise that the providers are not trying to change anything. They are glad to see the back of commission, even the ones who have been paying it, because they have been losing money by doing so. As far as I can see providers are the only people who have lost out through commission. Employees, employers and intermediaries have all done very well out of providers’ ability to pay commission.’

Which may lead you to consider the other views with a hefty dose of salt!

I will continue to keep you posted on this subject as things develop.

Best regards

Steve