Cofunds pushes for legacy clarity

Cofunds is urging the FSA to clarify its stance on legacy commission following confirmation the regulator is pushing ahead with a proposed ban on the payments.

Earlier this month, the watchdog said in consultation paper 11/26 it will proceed with a ban on legacy commission in what was a widely expected move.

Legacy commission refers to new commission due to an adviser as a result of a change to a contract set up pre RDR, but which occurred post RDR.

Under the proposals, life policy funds will be brought under the scope of the ban with a top-up to a life policy constituting a change to a pre-RDR contract.

Although the consultation paper set out 13 scenarios under which the legacy commission ban will kick in, Cofunds is pushing the FSA to come up with additional examples of when commission will no longer be payable.

"We will be pressing the FSA for further clarity on a number of key areas which will be critical in gaining complete understanding for all scenarios on when trail commission will cease to be allowable for legacy business," it said.

The FSA said feedback from the consultation could throw up further scenarios or "variations" of those 13 themes listed in the paper.

Whilst welcoming the "general thrust" of the paper, Cofunds said "significant questions" remain over the treatment of legacy commission and warned the industry faces a race against time to prepare for the ban.

This chimes with a warning from FSA head of investment policy Peter Smith who told IFAonline shortly after publication of the paper that providers yet to adapt their systems face an "arduous task" preparing for the ban.

Cofunds also said it is unclear how the proposed ban will interact with re-registration rules.

"There's nothing in the current technical standard (ISO20022) that caters for legacy and non-legacy and this will need very careful consideration," it said.

"This is a vital requirement for the industry and it's important we get this resolved in the most timely and efficient way."