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Financial advisers accused of 'ripping off' pension save
Originally posted by 5corpio
Financial advisers stand accused of needlessly switching consumers from one pension plan to another simply to earn commission.
The 60-page report by Consumer Focus showed that some consumers are being advised to switch to different pension products, often with higher charges or higher risk. The higher fees wipe thousands of pounds off a fund’s value.
The consumer watchdog added that the trend for products to charge ongoing fees, known as ‘trail commission’, is increasing in advance of the expected ban on trail commission when new rules on financial advice are introduced in 2012.
It is estimated that pension companies pay IFAs between £200 million and £800 million in commission a year, with a quarter being trail commission. The report highlighted that consumers do not fully understand the purpose of the trail commission: whether it is for ongoing service or deferred commission.
It also found that over 50pc of customers paying trail commission had received no service in the last two years from their IFA. Worryingly the research shows many consumers do not appreciate the impact this additional annual charge will have on their pension pot, Consumer Focus said.
Read more on this story: Financial advisers accused of 'ripping off' pension savers - TelegraphThe consumer watchdog added that the trend for products to charge ongoing fees, known as ‘trail commission’, is increasing in advance of the expected ban on trail commission when new rules on financial advice are introduced in 2012.
It is estimated that pension companies pay IFAs between £200 million and £800 million in commission a year, with a quarter being trail commission. The report highlighted that consumers do not fully understand the purpose of the trail commission: whether it is for ongoing service or deferred commission.
It also found that over 50pc of customers paying trail commission had received no service in the last two years from their IFA. Worryingly the research shows many consumers do not appreciate the impact this additional annual charge will have on their pension pot, Consumer Focus said.