Legacy commission applies to all retail investment products brought by a client before 31 December 2012.

‘Policy Statement 12/3 Distribution of retail investments: RDR adviser charging- treatment of legacy assets’ follows a consultation paper on commission last November and further clarifies when commission can and cannot be paid.

Commission cannot be paid on top-ups into a retail investment product or on increases to regular payments into a product.

However, it can be paid on the investment amount resulting from pre-RDR advice or a pre-RDR transaction.

This includes new payments into a life policy or unit trust and increases to regular payments into a life policy or unit trust.

The FSA has said commission can also be paid when there is:

• No change to the product.
• A reduction in the investment amount of level of regular payments.
• A change from accumulation units to income units or vice versa.
• Fund switches within a ‘life policy’.

Regarding fund switching, both the Association of British Insurers and Association of Independent Financial Advisers had supported the continuation of trail commission on these products while the Investment Management Association had argued it would create an ‘unlevel playing field’.

The FSA said: “Given that the trail commission relates to the product as a whole, we consider that the ban on new commission post-RDR does not affect the payment of trail where the product itself is unchanged, with no new money being paid into it.”

The document can be viewed here