Legal & General is to stop paying trail commission on single premium bonds to intermediaries. Th...
Legal & General is to stop paying trail commission on single premium bonds to intermediaries.
The company claims that weak equity markets and lower solvency mean it will have to stop paying renewal in order to be fair to consumers.
The company will stop paying commission on 2 November and claims that the cost of paying trail has risen.
John Morgan, head of public relations at L&G, said: 'The fall in equity markets have changed the dynamics of the products and commission terms so that we can be fair to customers. The cost to policy holders of commission options which include trail at current levels now exceed that of the initial commission only levels.'
L&G claims the change fits in with other actions that it has had to make in light of recent market falls.
Morgan added: 'This is consistent with bonus rates being cut and the imposition of market value reductions.'
Another factor leading to the change is the weaker solvency of the company.
Morgan said that though L&G remained strong, the current unstable position of the world economy meant that measures needed to be taken to ensure the life office remained financially healthy.
Currently intermediaries have six remuneration options. Up-front only commission is 5.2% and trail options range from 3.5% up-front with 0.5% trail to 4.86% up-front with 0.1% trail.
The products affected are the With-Profits Income Bond, the With-Profits Growth Bond, the Investment Bond that has 14 underlying funds and the Investment Bond with death guarantee.
Legal & General said it will review the position in the new year and it had not ruled out the reintroduction of trail commission.
No preferred charging model
To 1,552 families and businesses
HL and Liberty SIPP slowest
Lifetime and annual allowances