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&#39Phantom&#39 stakeholder haunts the Government

The Government faces a grilling this week over stakeholder regulation

loopholes which IFAs say unscrupulous employers could use to set up phantom

stakeholder schemes.

Conservative pensions spokeswoman Jacqui Lait will put questions to the

Government at a stakeholder standing committee on schemes which meet the

current regulations but effectively allow employers to shirk their


The Opposition has been alarmed over a number of loopholes which allow the

setting up of phantom schemes.

Experts say these include an employer offering a death-in-service scheme

which means they can claim employees have access to an occupational scheme

although it does not offer pension benefits.

Clerical Medical pensions strategy manager Nigel Stammers says: “Employers

could use a bluff scheme by asking employees to match their 10 per cent

contribution. If the employee cannot afford this, the employer is let off

the hook as it can still say it offered a stakeholder scheme. It is up to

the industry not to abuse these loopholes. All that will happen is the

Government will close the loopholes and impose extra complications to the


Torquil Clark pensions development manager Tom McPhail says: “I know of

some advisers who have been asked to set up money-purchase schemes with 1

per cent payable as an employer contribution. The fact it is rubbish is

largely irrelevant as far as the legislation goes.”


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