RDR: FSA calls for suggestions on charging principles for GPPs

The Financial Services Authority has asked the industry for suggestions on whether it should apply adviser charging principles to group personal pensions (GPPs).

In its RDR Consultation Paper, issued today, the regulator asked the industry for suggestions on the best way to ensure the intentions behind its adviser charging principles were applied where GPPs were sold without advice.

It asked if the principles should be applied where individual advice is given on GPPs and whether the principles should be applied to non-advised GPP business, and if so how?

The FSA said the predominant market model was for GPPs to be promoted to individual employees without personal advice - sometimes with commission being paid by the product provider that assisted the employer in choosing the scheme.

But it said it feared this may not comply with its adviser charging principles - which will aim to make sure investors know up-front how much advice is going to cost and how they will pay for it

The consultation paper said: "If we do not apply the principles behind adviser charging to unadvised GPP business, we may run the risk that our proposed rules on adviser charging could be circumvented in this market."

The FSA said one suggestion it had received was that it should introduce the concept of "arranger charging" for GPPs, so that where advice is not given to employees, any intermediary remuneration would be negotiated between the intermediary and the employer - even if it was ultimately obtained from contributions or scheme funds.

It said this could be disclosed to potential GPP members alongside the usual key features document - but noted it could be complicated to work.

The FSA said the consultation on the RDR proposals would last four months - but said it would welcome responses to the issues surrounding GPPs, by July 31.

It said it intended to publish a further consultation with draft GPP rules later this year.

The RDR changes will take effect from the end of 2012.

The FSA said it hoped the changes would improve outcomes for savers and investors by enhancing the quality of advice they receive, and prepare both consumers and the industry for the future.