STANDARD LIFE, Europe’s largest mutual life insurer, is snubbing small businesses by making its group pension schemes unattractive to companies with few employees.
An internal document, seen by The Times, shows that after July 16, Standard Life will no longer pay commissions to independent financial advisers (IFAs) who help companies to set up a pension scheme with fewer than 50 members.
This means that IFAs, who provide the link between business and life insurers, will have to charge a fee for their services, making the pension scheme more expensive for employers to run.
Barry O’Dwyer, marketing director at Standard Life, said small schemes no longer represented a profitable business line. “We are trying to make ourselves less attractive to small group pension schemes,” he said. “Instead of refusing business outright, we decided to stop paying commission to advisers. Employers can still come directly to us but we are not going to encourage it.”
Worst affected are employers looking to set up occupational plans, known as contracted-in money purchase schemes. Companies with fewer than 50 employees paying average monthly contributions of less than £250 will have to pay a fee to IFAs for advice. With the simpler group personal pensions plans, the cut off point is 20 employees paying less than £150 each a month.
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The move echoes a trend among life insurers seeking to avoid low-margin business. Norwich Union and Scottish Widows have already moved away from supplying group schemes to small firms. Scottish Equitable is one of the few players left servicing the market.
The decision is also in line with announcements made by Standard Life earlier this year. When announcing that it was likely to shed its mutual status, management said it would be repositioning its business to focus on more profitable areas.
One area that has proved particularly unsuccessful has been its attempts to win market share by selling stakeholder pensions through the Post Office. “Sales have been very slow,” Mr O’Dwyer said. “It confirmed to us that it is very difficult to sell pensions without giving advice.”