Scottish Life has defended its decision to not built a system capable of accepting adviser charging structures saying it would not make “good commercial business”, after the Financial Ombudsman Service rejected a complaint against the firm.
Fos rejected a pension saver’s complaint relating to his company pension scheme run by Scottish Life, which has stopped accepting additional contributions for members in the months following the Retail Distribution Review.
Julian Pruggmayer, IFA of West-Midlands based Financial Risk Management, told FTAdviser that he has received 10 complaints from employees within a company who wish to increase their monthly pension contributions and he submitted one as a ‘test case’ to the Fos.
In its defense to the Fos, Scottish Life said that as a result of the RDR it has become “impractical” for many of its legacy contracts to continue. It stated that to meet the requirements of the RDR, it would take significant investment that would not be financially viable.
The firm also cited a clause in its terms and conditions that allows Scottish Life to make alterations to the product should it become “impractical or impossible” to continue with the current term and conditions.
The company has now set up a second pension scheme with Scottish Life to enable employees to increase their pension contributions.
Fiona Tait, business development manager for Scottish Life, told FTAdviser that this case involved one of its ‘Talisman 98’ products, which equated for approximately 15 per cent of individual contracts when it took the business decision not to accept post-RDR increments in 2011.
She said: “These were not the only legacy products affected but I am unable to give you figures for all of them - I can only say the income received was not sufficient to justify the cost of redesigning them.
“We are aware that some other providers made the decision to continue accept increments with any advice charge having to be paid on top of the existing charging structure. This approach has also attracted criticism since the original charging structure would have included an element for commission which it is not possible to pay on the premium increment.
“Rather than effectively charging the client twice for advice we took the decision not to accept additional monies on those contracts where we could not build a system capable of supporting both pre- and post-RDR charging structures.”
Mr Pruggmayer said: “I don’t really blame Scottish Life but I do blame the regulators. The regulator wasn’t even six weeks old when we found out about this problem. How much is left to come out of the woodwork?
“This is another example of the blind leading the blind. The reason why this industry is a mess is that there is no one at the sharp end of the regulators.”
