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Royal London calls on OFT to ban active member discounts

Royal London calls on OFT to ban active member discounts

Royal London has called on the Office of Fair Trading (OFT) to ban active member discounts as part of its review into the defined contribution (DC) pension scheme market.

The mutual called for the ban in its response to the OFT’s review of DC pensions which began in January.

The deadline for pension providers to submit responses closed last week and the OFT will publish a report on its findings in August.

Gareth Evans (pictured), head of corporate affairs at Royal London, said the commission ban had helped remove some bias in pension advice, but that active member discounts should also go.

‘The removal of commission through the retail distribution review has been an entirely good thing because in the past it provided a perverse incentive for advisers to move schemes around in order to garner additional commission.

‘So called active member discounts appear to be a feature of the market, which I don’t think are entirely in the interest of pension savers, we’d like to have those banned.’

Aegon has also submitted a response to the OFT in which it called for tighter rules to stop ‘unregulated players’ operating in the UK.

Steven Cameron, Aegon regulatory strategy director, said regulatory gaps which allowed these players to operate in the UK needed to be ‘plugged urgently to avoid customer detriment and reputational damage’.

Cameron also called for the OFT to focus on the role advisers played in ensuring consumers ended up in suitable schemes.

‘Advisers are key to the successful operation of workplace pensions, providing advice and guidance to employers and ensuring positive market competition, all to the benefit of members,’ he said. 

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