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Insurance industry

Huge Changes to Personal Pensions Bring Bonanza for Financial Advisers

Strategic Insights

— 1 min read

As the UK prepares to implement new rules affecting personal pensions, financial advisers are set to reap significant rewards. The changes, set to come into force next April, will allow clients to make one-off contributions to their pension pots, creating a lucrative market for financial advisers. Life companies such as Norwich Union and Legal & General are already offering higher commission payments to secure a share of this market, with Norwich Union's 7.56 per cent commission on its single premium stakeholder pension business being a prime example. This increase in commissions raises questions about the impartiality of financial advisers, who often rely on commission income to make a living.

Key Takeaways:

  • Financial advisers stand to gain significantly from the upcoming changes to personal pensions, with clients set to make one-off contributions to their pension pots.
  • Life companies such as Norwich Union and Legal & General are offering higher commission payments to secure a share of this market, with Norwich Union offering up to 7.56 per cent commission on its single premium stakeholder pension business.
  • This increase in commissions raises questions about the impartiality of financial advisers, who often rely on commission income to make a living.
  • The reality is that in commission-based financial advice, money talks, and advisers may choose products with higher commissions over those with lower or no commissions.
  • This raises concerns about the independence of financial advisers' recommendations, and whether clients are truly getting the best advice for their needs.
  • The cap on annual management charges for stakeholder pensions has been raised from 1 per cent to 1.5 per cent, allowing life companies to levy an extra 0.5 per cent per year and use this money to fund extra commissions.
  • Tom McPhail, pensions research manager at Hargreaves Lansdown, notes that charges on pensions are creeping up, but financial advice does cost money, and customers now at least have a clear understanding of the charges and commission payments involved.

Statistics:

  • Up to 7.56 per cent commission on Norwich Union's single premium stakeholder pension business.
  • 1 per cent to 1.5 per cent increase in annual management charges for stakeholder pensions.
  • 0.5 per cent per year extra that life companies can now levy on stakeholder pensions to fund extra commissions.

Sources:

  • [Isabel Berwick, The Sunday Times]

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