Adviser > Your business > RDR > June 2010 > RDR – Policy Statement 10/10 on corporate pensions
RDR – Policy Statement 10/10 on corporate pensions
The Financial Services Authority (FSA) has confirmed the adoption of 'consultancy charging' for corporate pensions from the end of 2012. Are you prepared for the new regulations?
The Financial Services Authority Policy Statement 10/10, Corporate pensions – feedback to CP09/31 and final rules sets out how the Retail Distribution Review (RDR) will work in the corporate pensions space. There are no major surprises – much of the original consultation has been taken forward.
Scope of PS10/10
This paper covers what are collectively termed as 'GPPs' which include:
- Group personal pensions
- Group stakeholder pensions and
- Group self-invested personal pensions
Key points
In depth
Download the following PDF documents for more information:
As widely expected, the FSA have gone ahead with the banning of provider driven initial commission models and the adoption of 'consultancy charging'.
-
'Consultancy charging' will apply irrespective of whether any advice has been given to individual prospective members or where the sale has been made without advice (via direct marketing).
-
Initial commission will still be allowed from GPPs set up before 2013, including new entrants and increments.
-
Extend the ban on initial commission to product providers' investment products linked to occupational pension schemes.
-
Allow 'consultancy charging' from GPP contributions and/or member accounts on a pound for pound basis, as agreed between employer and adviser.
-
Require full disclosure by advisers to employers of the potential adviser remuneration, including the likely total.
- Confirm the ban on factoring for GPPs.
Our view on the FSA's rules
Whilst we agree with many of the conclusions the FSA has come to, we remain concerned about several issues:
-
Allowing provider driven initial commission models to continue for new entrants and increments discourages transition to the new regime. Advisers and providers should move towards the new model as soon as possible to help smooth the transition and prevent market bias up to 2013 and beyond.
-
The FSA should carefully monitor the GPP market to prevent the risk of a 'fire sale' ahead of implementation.
-
Although not strictly an RDR issue, the legislative arbitrage caused by the anomalous application of the 2 year refund rule needs to be properly addressed by the DWP to prevent market bias in favour of trust-based schemes.
-
We believe that provider factoring should be allowable on an industry standard basis. It is unfortunate that the FSA have not considered taking this suggestion forward. However we recognise that there should be consistency between group and individual products. Adviser firms may of course be able to secure factoring or loans on the open market or via their network to mitigate the ban on provider factoring.
For professional advisers only
