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&#39PPI investments fail stake criteria&#39

Pooled pension investments will fail the stakeholder crit^_eria, according

to leading
fund managers.

The warning comes from the chairman of Autif&#39s pensions advisory group

Fiach Maguire, who says most collective investments, such as unit trusts,

investment trusts and Oeics, fall foul of the 1 per cent charge cap

governing stakeholder.

Collective investments generally have initial charges of up to 6 per cent

plus an annual management charge in excess of 1 per cent.

The Treasury had proposed PPI as an investment wrapper that would

largely
be compatible with stakeholder, offering investors the

opportunity to diversify from
the traditional life office
pension

funds by investing
in a full range of unit and investment trusts.

Maguire, who is also pensions development director at Perpetual, says

other companies believe that because of the charging structure of these

investments, provi-
ders would be extremely unlikely to launch a

range
of unit trusts mirroring its existing range purely to fit within

stakeholder.

He says: “If you put the PPI wrapper around existing unit trusts, by

definition it just won&#39t meet the stakeholder criteria. Virtually all unit

trusts are written on a bid/offer spread basis and that just will not meet

the standard.

“I cannot see too many people launching a brand new range of unit trusts

just to
mirror their existing range.”

Gartmore head of retail pensions Nick Hodges says:
“I think that it

will be impossible for most providers to offer PPI based on the 1 per cent

charging structure under stakeholder.

“The Government just does not understand the dynamics and is trying to

squeeze all the flexibility it wants into a 1 per cent charge and it does

not fit.”

A Treasury spokesman says: “We have always said that PPI and stakeholder

would be entirely compatible and would run alongside each other. That is

part of the reason we delayed their launch.

“If providers do not want
to offer them within stakeholder criteria,

then it is
a matter for them.”

The Government&#39s latest Green Paper on housing looks set to bring a

healthy influx of new customers to the housebuying market.

The consultation paper outlines a new “starter home initiative” aiming to

provide assistance for key workers, including nurses and teachers, which

could include the possibility of interest-free loans.

The paper was issued last week with the aim of improving the provision,

maintenance and management of homes.

Lenders have welcomed the move, saying it could lead to a whole new

market, previously exc^_luded from housebuying, to need the services of

lenders and mortgage intermediaries.

Legal & General marketing manager (housing market) Richard Verdin says: “I

would imagine the Government could operate the assistance in the same way

as Miras, allowing borrowers to claim against their mortgage product. This

could be a new set of customers for lenders and IFAs which has to be good

news.”

Interested parties have until July 31 to respond to the plans.

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