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A pension crisis can be averted

A pension crisis is not a pension crisis simply because the national newspapers say so but the system is on the verge of one.

Companies are converting to defined-contribution arrangements and often cutting contributions to boot. But what can be done?

The phasing out of the dividend tax credit has hit home but its reversal is politically difficult as revenues fall. It may also be a legal minefield.

Secretary for Work and Pensions Alistair Darling&#39s call to allow some smoothing of the liability is a sensible one although fans of with-profits schemes will not miss the irony.

As for personal pensions, stakeholder has stopped a situation where contracts charged too much in the early years although Darling&#39s suggestion that stakeholder has been a success is one we take issue with. The 1 per cent cap remains an overreaction and we still advocate a slight rise in the cap contingent on advice being provided, whether fee, defined payment or authorised.

More adviser-led sales would also inject competition into the pension in later years when 1 per cent is much more generous. The alternatives – further tax incentives or compulsion – are less palatable for the Government and it may be wiser to increase the retirement age as leading thinktank the IPPR suggests.

We are also concerned that Alan Pickering and Ron Sandler may be asked to perform a miracle. The UK pension industry is no place to test out the theory of creative destruction. Our advice to these two gentlemen is, first, do no harm. If they do further damage to the retail side of the market, it really will be a crisis.


Credit Suisse First Boston – Global Titans Income or Protected Growth Plan 2

Type: Guaranteed equity bondAim: Income or growth by investing in a Jersey based companyMinimum-maximum investment: £7,000-no maximumTerm: Five yearsGuarantee: Capital returned in full at end of term regardless ofperformance of underlying investmentReturn: Choice of up to 55% growth, 10% income a year or 2.25%income a quarterInterest rate: 6%Closing date: April 8, 2002Commission: Initial up to […]

Multi-ties will add to the providers&#39 pressure on IFAs

Just which world is Brian Wood living in when he suggests that advisers&#39 power will be increased (Money Marketing, February 21)?This may be true for bigger IFAs but for individual practitioners, power remains entirely with the product providers.In the same week that Mr Wood&#39s letter appeared, Norwich Union rang me to say that if I […]

ScotLife wizard lacks magic

Scottish Life has just awarded Credit Suisse First Boston the “Harry Potter failed wizard” prize for the most inaccurate crystal ball gazing of 2001 after its forecast that the FTSE 100 index would be at 7,400 at the end of 2001.I would have thought that this once fine mutual would be keeping its head down […]


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