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Euro directive could hit group pensions

A new European Union directive could significantly reduce the number of people enrolled into group personal pension schemes despite auto-enrolment getting the green light from Brussels last week.

The unfair commercial practices directive, set to be introduced next week, is likely to outlaw advertisement seminars, where groups of employees register to join a scheme after listening to an explanatory seminar.

The practice, which is commonly used to get round the distance marketing directive, is likely to be seen as potentially deceptive.

If advertisement seminars are banned, employers will have no choice but to send large amounts of documentation to staff or offer one on one advice sessions, with both likely to push up costs significantly.

Standard Life head of pensions policy John Lawson says the directive could see employers shying away from pension schemes.

He says the problem could be averted if the Department for Work and Pensions allows auto-enrolment into group personal pensions with immediate effect.

Last week, the European Commission confirmed that the practice was not against EU law but the DWP is not planning to allow it until pension personal accounts are introduced in 2012.

Lawson says: “The Department for Work and Pensions has the power to overrule this by implementing the auto-enrolment for group personal pensions now.

“The UK gold-plates EU legislation again and again. This means that employers will have four years of obstacles in their way before they can auto-enrol staff. Some might say they cannot be bothered.”

Syndaxi Financial Planning managing director Robert Reid says: “I would say that 60-70 per cent of group personal pension schemes use advertisement seminars to enrol their staff so this directive is going to have a big impact.”

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