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Concurrency flows towards IFAs

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

of stakeholder.

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&#39s 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

below £30,000.”

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.”


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