Life companies are offering commission of up to 20 per cent to advisers who sell their pension plans in a blatant bid for business following A-Day.

The sweeteners, which could cost investors up to £20,000 on a £100,000 lump-sum investment, have been branded “obscene” and “excessive”. They have also raised the spectre of the pensions mis-selling scandal of the 1990s, when salesmen were encouraged by commissions to shift their clients out of generous final-salary schemes into personal pensions.

Firms are offering such high commissions partly because they want a slice of the boom in contributions that has followed A-Day on April 6. Prior to that, contributions were limited to a portion of earnings, but workers can now pay in their entire salary up to a maximum of £215,000. This has sparked a surge in high earners salting away their bonuses into pension plans to claim the tax relief.

Standard Life said last week life and pension sales had jumped 35 per cent in the past year, while Royal London, parent company of Scottish Life, announced that growth in new business for the nine months to the end of September 2006 had increased by 21 per cent.

However, investors are now being urged to ensure their advisers are not ripping them off by taking up to a fifth of their contribution in commission.

Prudential has a deal where advisers can take a cut of up to 20 per cent from an investor’s pension pot when they make a lump-sum contribution into the Pru Flexible Retirement Plan.

Scottish Widows is offering advisers 15 per cent of one-off payments into its Retirement Account, a self-invested personal pension (Sipp) designed for high earners. It has a minimum contribution of £10,000. Axa also pays up to 15 per cent on lump-sum investments in its Sipp.

Alan Steel of Alan Steel Asset Management said: “More and more professionals are making big lump-sum contributions to pensions and I find these sweeteners obscene. They leave me speechless.”

The return of high commissions raises the risk of a clampdown by the City regulator, the Financial Services Authority, which is currently probing how incentives distort the sales process.

Tom McPhail, head of pensions at Hargreaves Lansdown, an independent adviser, said: “These rates are undoubtedly excessive, and directly contrary to the direction in which the FSA is looking to take the industry.”

“Before A-Day, the most a typical professional could put into a personal pension was £41,000; now they can invest a maximum of £215,000, which has certainly raised the stakes. Whatever the life companies tell you, they are not averse to buying business.”

The high-commission schemes have also raised fears that some professionals could be persuaded to transfer out of their occupational schemes and put the money into a personal pension. In some cases, this can be a good idea because personal pensions generally offer more choice than company plans. However, you normally need to earn returns of 15 per cent to 20 per cent to recoup the benefits you have given up, and you will bear more of the risk that your fund will not perform as expected.

The life firms argue that their plans are unlikely to be abused because commission above a certain level must have the explicit agreement of the client. At Prudential, consent is required for deals in excess of 10 per cent and at Scottish Widows the level is above 5 per cent.

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