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Contracting out is top target in pension clean-up

IFAs and providers are welcoming the Department for Work and Pensions&#39 review of pension legislation as a huge opportunity to clear away dead wood from the system.

Former NAPF chairman Alan Pickering is to head the independent review of private pension legislation. The Government says it is determined to simplify the pension system and reduce compliance costs.

Contracting-out rules are topping the list of what both IFAs and product providers say must be reformed, with calls for policy information to be dramatically improved.

Money-purchase schemes and annuity purchase rules are also high on the list of areas which are thought to be in need of simplification.

IFAs would like to see the system of pension legislation reduced to only two or three levels.

Many in the industry believe the biggest opportunity to simplify the regime was missed in the development of stakeholder and they say that a radical overhaul of the system is long overdue.

The review will identify a range of options for change, which Pickering will present to the DWP in July 2002.

Scottish Equitable pensions development director Stewart Ritchie says: “We have reached the stage where the system is so complex that practitioners can be diligent and still make mistakes.I hope that Pickering will be gunning for contracting out, where additional complexity is being introduced with the state second pension.”

Torquil Clark pensions development manager Tom McPhail says: “There was a missed opportunity to simplify the regime when stakeholder legislation was formed. This is an opportunity to tidy up the whole system.”

Wentworth Rose managing director Philip Rose says: “Pensions have been crying out for simplification for years. I hope there is a root and branch reorganisation of the system. This has fantastic potential to reduce compliance costs, which are currently enormous.”

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