A PIA spokeswoman said: "We now have evidence of high commissions which might give rise to bias in the advice given. We are looking into how the product has been sold." Financial advisers have, according to industry sources, received sums as high as pounds 30,000 when clients have put put pounds 500,000 into a single income draw-down plan, a type of personal pension aimed at wealthy investors.
Industry sources fear that high commissions will take such a large chunk of capital out of the plans that there is a high risk investors will lose money over the life of the plan - even if investments do well. Investors will only benefit if the plans grow faster than 11 per cent a year. Historically, performance has been lower than this.
Income draw-down plans are sold to investors who are about to retire but want to put off buying an annuity, a policy which pays a guaranteed income from retirement to death.
Kenneth Clarke, former Chancellor of the Exchequer, enabled the introduction of the plans in 1995. The move followed complaints that pensioners were getting incomes thousands of pounds lower than they would have received if annuity rates were better.
The income draw-down plans were intended to allow retiring investors to draw a variable income from a pension fund without buying an annuity. The money could then be invested until the investors were forced by the rules to buy an annuity at the age of 75.
However, independent advisers are instead selling the plans on the basis that clients do not want to swap their capital for an annuity, which cannot be passed on to their heirs.Concerns have been raised that some advisers have been selling the products because they can extract up to 6 per cent of a client's pension fund in commission. With the alternative, an annuity, commission is just 1 per cent.Reuse content