Aegon has called on the pensions industry to take account of the distinctive operation of the corporate pensions market when responding to the Retail Distribution Review (RDR).
The provider highlights that group personal and stakeholder pensions fall within the scope of the RDR, although they did not receive much attention in the discussion paper.
Aegon says the role of the employer makes the group market very different from the individual market and believes the problems identified by the FSA in the individual retail market do not translate directly to the corporate market.
The provider says imposing individual market solutions will not work and could potentially cause damage.
Aegon says it would like to see the RDR used as an opportunity to improve the efficiency of the corporate market. It recommends the FSA recognises the employer as the primary customer and changes the disclosure regime to reflect this.
A statement from Aegon says: “The company believes disclosure to employers and employees should be tailored to reflect the decisions each party makes. Aegon suggests giving employers more information than they may currently receive and providing employees with the key information they need, with additional details available on request.”
Steven Cameron, head of business regulation at Aegon, says: “The corporate market has been largely forgotten in the RDR debate so far.
"But if we don’t have a proper discussion of its particular needs we risk imposing solutions that are designed for the individual market and which could cause collateral damage.
"This is a huge market that gets millions of people saving for retirement so it shouldn’t be ignored.
“We should also grasp this opportunity to explore different ways of regulating the corporate pensions market to recognise the central role of the employer.
"By changing the disclosure regime and applying customer agreed remuneration at employer level we can encourage greater employer and employee engagement in pension saving.”
Have Your Say
"I read this article with interest and I do hope that you will be interested enough to take on board something which I consider to be extremely important in the sale, servicing and management of pensions to the general public. A full industry debate on this issue would be tremendously valuable.
"Aegon want the RDR to recognise the Employer as the 'client' in Group Schemes. Presumably Customer Agreed Remuneration could be conducted with the Employer thus leaving the Employee unadvised, and out in the cold if he actually wants some personal advice on the investment of the funds which HE owns.
"The only way open for an Employee to get advice on asset structure, fund selection, risk profiling etc will be to pay a further tranche of CAR to an adviser of his own choosing whom he trusts. This is Double Charging!
"Too often Group Pensions are a cash cow for large IFAs, (such as Origen (owned by Aegon?)). The servicing of the plan is conducted by a lowly sales person who turns up at the employer's premises once a week/month/year to 'explain' the pension plan to new entrants. Such meetings are often allowed 15 minutes per person, if that.
"I have lost count of the number of my clients asking me to advise them on the fund selection for their Group Schemes. When advised to see the holding IFA they are told that they do not give 'investment advice' and if advice on the transfer of former arrangements is requested it will only be considered on advance payment of exorbitant non refundable fees.
"I have on several occassions attempted to obtain appointment as an IFA to clients who are members of Group Schemes. Life Offices seem unable to cope with the situation where an employer selects one IFA and the Employee selects another.
"If I arrange a Pension for a client I am, quite rightly, expected to recommend how the money is invested and to consider all aspects of his financial situation. Why should Group Scheme members accept a lower standard of advice or service for what effectively is the money THEY are paying via plan charges?"
G Chaundy is an IFA at The Grosvenor Consultancy.
"I will be ensuring my submission under the RDR and as many IFAs as possible make it clear that any attempt to carry on the practices which do not respect the individual clients right to look to an adviser separate to their employer is a clear conflict of interest and should not be supported by the RDR."
Phil Castle is an IFA at Financial Escape.
To comment on this story contact:
Tel: 020 7034 2679
E-mail: [email protected]
Joe McDonnell joins as head of portfolio solutions (EMEA)
Adviser of the Year - South East
Fidelity Multi Asset CIO's outlook
Willis Owen report
From 1 March