Fresh calls for commission ban on all annuity sales

Fresh calls for commission ban on all annuity sales

Mike Morrison, head of platform technical at AJ Bell, is calling for commission to be banned on the sale of all annuities as well as in the secondary sale market, in order to create a level playing field.

Savers who bought annuities will be able to sell the product from 6 April 2017.

In April this year, the Financial Conduct Authority (FCA) announced that providers were to be made responsible for checking pensioners received government-mandated advice before they sold their guaranteed income in the developing secondary annuity market.

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The rules state that the regulator would require broker and adviser-broker firms to set out their charges up-front in writing, and agree the amount with the seller.

And according to the rules, an adviser cannot receive commission for selling a client’s annuity.

Mr Morrison told Financial Adviser he believed the consultation paper on the regulation of the secondary annuity market seemed to sound the death knell for non-advised commission on annuity purchases.

He said: “How can you justify allowing commission when an annuity is bought from a non-advised broker, but not when it is sold?

“It is an unlevel playing field, and the FCA should address this as a matter of urgency. The continuing existence of commission risks distorting the market and, for the sake of consistency, it should be banned completely for annuities.”

Neil MacGillivray, head of technical support at Salisbury-based James Hay Partnership, said he supported what Mr Morrison said.

He added: “It is an unlevel playing field, it is as simple as that. It doesn’t surprise me, but it does seem illogical.”

Daren O’Brien, director at London-based Aurora Financial Solutions, said: “Commission should be banned on both sides of the annuity equation.

“We’ve now been paid for years by fees, and our clients prefer this. It further demonstrates our professionalism and independence.”