“If commission is to be banned on the setting up of new GPPs from 2012, should providers be permitted to pay it on existing ones?”

John Jory, director, B&CE Insurance
No. If commission is banned on new GPPs, it must also be banned on existing arrangements. Otherwise the industry will walk straight into yet another commission-driven product bias minefield. If a tilted playing field was allowed, advisers will be open to accusations that they have not recommended a new scheme because they won’t earn any commission for doing so. But equally, the existing scheme may well be the best option for the employer and his staff, so the adviser could be right to leave it where it is.

As with most aspects of the thorny issue of remuneration for advice, the only sensible approach is to ensure full consistency across as wide a scope as possible, as well as fair payment for the advice given. The bottom line is that a level playing field is an essential ingredient to the removal of product bias, whether across different types of product or existing and new versions of the same product.

If a brave new world of genuinely unbiased financial advice is to be ushered in successfully, a full and complete transition is necessary. Tainted advice must not only be removed, it must also be seen to be removed.

Steven Cameron, head of business regulation, Aegon
Yes. While Aegon supports a move to Consultancy Charging, the FSA is right to allow commission on new entrants and increments to pre-RDR GPPs. This avoids unsettling good existing schemes – which would be bad news for employers and members alike.

Mixing commission on ongoing contributions with CC for ’new’ money would be extremely confusing to employers and members. And the huge complexities of layering new charges/remuneration approaches onto existing schemes across multiple industry systems would either drive up costs for all, or make any new adviser remuneration from such schemes unfeasible.

A forced move from commission to CC has other downsides. Post-2012, advisers would be incentivised to replace existing commission-paying schemes with new single CC scheme, with no member benefit but inevitable employer time-cost. Pre-empting this, providers would have to stop accepting new schemes, just when employers should be facing up to their pension reform responsibilities! Let’s focus on avoiding unsettling good existing schemes and on implementing a viable future CC model.

Michael Wainwright, partner, Eversheds
Yes. The FSA’s proposal is that the market should continue to operate on the basis of commission until the RDR is brought into effect at the end of 2012.
This interval is to allow providers time to make the system changes that will be needed to support the new environment of adviser charging and consultancy charging. The overall impact of consultancy charging may be considerably less in practice than that of adviser charging, where the fee has to be agreed with the end investor.

Where a GPP is set up under the current regime, the remuneration for the adviser will be based on commission, because providers don’t currently support consultancy charging. It makes sense for that remuneration arrangement to continue after RDR comes in, because nothing else will have been agreed to replace it.

However, the likelihood is that as RDR comes closer, providers will begin to make a consultancy charging model available, that can continue after RDR. We anticipate that in the run-up to RDR, the market will begin to phase out commission for new GPPs in favour of consultancy charging.