FT exposes the AMD issue

So what are AMDs? Silicon chip maker perhaps? Ants of Mass Destruction?

No this is the practice of ripping off the preserved members of personal pension schemes, in other words: Active Member Discounts.

Crafty, as IFAs and insurers pretend it's a discount for employees but really it's a licence to overcharge ex-employees. Capitalising on apathy and inertia of this growing pool of personal pension holders that have no trustee looking out for their interests.

See for yourself:

"Pension penalty for job changers"

By Debbie Harrison

Published: June 12 2011 07:16 | Last updated: June 12 2011 07:16

Many job changers in the UK’s private sector are paying overly high charges on the contributions built up in workplace pension plans, according to new research from the consumer organisation Which?

Some are being charged three times the benchmark for competitive annual management charges on defined contribution pension plans in order to boost adviser commissions and provider profits.


Several big providers of contract-based DC schemes that pay upfront commission to advisers, including Aegon, Aviva and Scottish Widows, operate a dual-charging structure. Under this, the annual charge increases from about 0.5-0.7 per cent to as much as 1.5 per cent when an employee leaves and does not maintain contributions.

There is a growing concern that the ban on all commission on advised sales of financial products from January 2013 has prompted some providers to increase initial commissions and to offset the cost – typically 15-25 per cent of members’ contributions in the first year – through high charges for leavers. Critics maintain this practice represents an inappropriate financial incentive or “bribe” to encourage advisers to sell certain products.

Lee Hollingworth, head of DC consulting at Hymans Robertson, says: “There is no question that some advisers and providers are involved in a sales spree ahead of the ban on commission in 2013. A lot of providers are moving out of the commission market. Those that remain are trying to get as much business on their books as possible and arguably are exploiting deferred members in order to pay initial commissions to advisers.”

The competitive benchmark for DC plans is set by the new government-endorsed National Employment Savings Trust (Nest), which will offer an effective annual charge of 0.5 per cent when it opens its doors for business in 2012.