Personal Pension  

‘Double-charging’ re-emerges as Aegon strips AE commission

Aegon will no longer pay commission on the first £100 of monthly contributions by new entrants to pension schemes set up before the Retail Distribution Review came into effect.

Although commission was banned by the Retail Distribution Review, regulation allows pension providers to continue paying commission to advisers for new entrants to schemes which were set up before January 2013.

However, after reviewing its pricing terms in the third quarter of last year, Aegon has decided to stop paying commission on certain schemes unless a member contributes £100 in aggregate, including the employer’s contribution. Even then, they will not pay commission on the first £100 contributed.

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An adviser who wished to remain anonymous and who advises on a large group pension for a corporate client pointed out that despite stripping out commission for sub-£100 new entrants, Aegon has not lowered its fees.

This means that the adviser may be forced to charge the client in addition to what the client was already indirectly paying through commission.

Previously, FTAdviser sister publication Financial Adviser revealed that almost 700 advisers had written to then-regulator the Financial Services Authority, warning that consumers could be effectively paying twice for services: through adviser charging as well as provider fees which once funded commission.

However, the regulator has said it falls to advisers to take potential ‘double-charges’ into account when using pre-2013 contracts and that it is not the responsibility of firms to compensate clients through rebates.

Last year (4 September) Friends Life blamed high costs as it cut all trail commission to advisers within its Premium Select Bond while maintaining fees at the same level.

A spokesperson for Aegon told FTAdviser: “We have always priced schemes on an individual basis and this remains our approach. This means looking at the characteristics of each scheme to find out what we need to charge to cover our costs, including the cost of commission.

“Automatic enrolment, together with industry reviews and the changing pensions landscape post-[Retail Distribution Review], is continuing to have an effect on the commercials of existing schemes.

“With this in mind, we carried out a review of our new entrant pricing terms in Q3 2013. As a result, in some cases, we will no longer pay commission on the first £100 of a monthly contribution paid by any new entrants to existing schemes, which have been reviewed by Aegon for auto enrolment pricing.”

At the time of publication, Aegon could not specify how many schemes were affected by the change.

The spokesperson continued: “The terms for existing members of these schemes remain unchanged.

“This stance allows Aegon to maintain the commission terms in place for new entrant premiums that lie in excess of £100 per month - a simple, clear message for advisers and employers that allows effective planning to place regarding adviser remuneration related to staging.

“We have clearly communicated this position with each employer and scheme adviser in advance of their staging dates and when schemes are re-priced.”