The Inland Revenue has finally given the go-ahead for up to eight million
people with occupational pensions to pay into stakeholder schemes
The reaction from the pension industry to the decision to permit partial
concurrency has been mostly positive, with providers claiming a small
victory in the ongoing wrangle with the Government over the shape and scope
The latest announcement means that occuptional scheme members earning less
than £30,000 will be able to save up to £3,600 extra a year in
stakeholder. The eligibility threshold means around 90 per cent of savers
in occupational schemes will qualify for stakeholder, according to the
A joint announcement from Social Security Secretary Alistair Darling and
Treasury economic secretary Melanie Johnson declared the ruling as
excellent news and “another step towards the simplification of pension
So why are many in the IFA community anticipating a surge in demand for
expert advice from occupational pensionholders in the run-up to
stakeholder's introduction in April 2001?
Torquil Clark pensions development manager Tom McPhail says: “It
potentially creates more work for IFAs, with more people requiring
guidance. This is beyond all scope of decision trees and the regulation of
supervisors at stakeholder helpline call centres. It backs up the
suggestion we made at consultation for all decision trees to have a default
IFA for when advice is needed.”
Scottish Equitable pensions development manager Steven Cameron says: “It
is being said that the new regulations will reduce the likelihood of
misbuying because you do not have an either/or situation, you can have
both. But IFAs will need to go back to existing clients and advise them on
the new option.”
Axa Sun Life senior technical manager Tony Toller-ton says: “Anything that
leads to IFAs needing to revisitold clients is good. In particular, clients
with FSAVCswill need to be looked at.”
The likely death of the already narrowing market for AVCs and
free-standing AVCs is one of the biggest implications emerging from the
concurrency announcement. The facility to draw a quarter of the stakeholder
fund as tax-free cash at retirement and the fact that earnings only have to
be proved every five years means stakeholder will be deadly competition to
AVCs and FSAVCs.
Consultant William MMercer describes the announcement as the end for AVCs.
Mercer Worldwide partner Peter Thompson says: “For the majority of
occupational scheme members, in the next few years we would expect
stakeholder pensions to replace AVCs as a means of extra saving for
“FSAVCs, with their higher charges, will also disappear for those earning
But has the Government actually plumped for the right concurrency route?
Opinion is divided across the industry.
Tollerton says: “If the Government had allowed full concurrency, people
would have taken advantage and, while no concurrency would administratively
have been easier, it could have created mistakes to be undone later.”
McPhail says: “It is messy. People drift above and below the eligibility
threshold and there is still a fair degree of complexity. The Government
should have bitten the bullet and gone for full concurrency to avoid a
confusing halfway house.”
By and large, the industry reception to partial concurrency has been warm.
According to Legal & General, the scene has been set for a “significant
step in making stakeholder pensions the success they deserve to be”.
But some experts are disappointed with the Government. Scottish Life head
of communications Alasdair Buchanan says: “The Government has missed a
golden opportunity to simplify pension regulation. This new layer of
complexity highlights the need for good quality advice.”