Providers and IFAs have blasted the FSA's decision trees for actively
discouraging the over- 40s from saving.
At the heart of the problem is the minimum income guarantee, the
means-testing Government benefit, which guarantees a certain income in
retirement and which, unlike the state pension, is linked to earnings.
Providers believe the Mig has effectively forced the FSA to insert a
clause in the trees warning the over-40s with little savings that they may
not need to bother taking out a stakeholder pension.
Experts fear the FSA's claim will exclude many of the Government's
potential stakeholder target market from making pension provision.
Providers and IFAs are calling for an urgent reappraisal of benefit so
people can take out a stakeholder confident that they will not be penalised
for saving when they retire.
The FSA says: “Particularly if you are over 40, have little pension or
other savings and cannot afford to save much, the little you are able to
put into a stakeholder may not be enough to bring your total retirement
income above the Mig. It would then be wasted.”
Scottish Equitable pensions development manager Steve Cameron says: “What
the FSA is saying is absolutely true and valid under stakeholder rules. But
I cannot see the Government allowing the FSA to take such a direct swipe at
its flagship pensions initiative by scaring off such a significant chunk of
its target group.”
Winterthur Life technical support manager Mike Morrison says: “The
Government must change the way stakeholder interacts with the Mig or find
alternative ways for people to get better value from their savings.”
Decision trees, p36