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Employers warned on stakeholder liabilities

Scottish Life says despite the FSA&#39s close scrutiny of IFA group personal pension sales, there may be more potential risks in recommending stakeholder as this could leave employers open to unexpected liabilities.

The issue surrounds employers offering stakeholder access to what the Department for Work and Pensions calls “non-relevant” employees.

If these staff, who do not need be covered by stakeholder, join the scheme and are unhappy for any reason, their employer may be vulnerable to claims for redress and having inappropriately offered stakeholder.

Scottish Life says the dangers to employers of designating stakeholder for non-relevant employees relates to protection given to them by the Welfare Reform and Pensions Act 1999. This in practice makes it safer to recommend GPPs over stakeholder, where the issue of relevance does not apply.

Scottish Life says the area is so unclear that it requires case law to establish to what extent employers are liable.

Head of communications Alasdair Buchanan says: “Before you know if there is definitely no problem with this area, for IFAs, there is the stakeholder route, where the risks are unclear, and the GPP route, where there are no risks of this kind.”

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