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We cannot accurately predict the outcome of the Govern ment&#39s attempt to encourage private pension provision through the mechanism of stakeholder but one truth rem ains self-evident. Whatever the product features, cost-effective ness and flexibility of a pension vehicle, the one factor that will truly affect the size of the pension available at retire ment age is the investment returns achieved.

In the pre-stakeholder world, much is made by some of the size of annual management charges. Figures as low as 0.4 per cent are being quoted against the cap of 1 per cent. However, it could be said that a difference of 0.6 per cent is irrelevant when superior fund performance can more than eradicate these minor differentials.

Time should not be spent focusing on the minutiae of charges but rather on researching the investment choice and performance backing up the products available. The Government is leading everyone down the road of focusing on cost to the exclusion of all other rationale. We should not follow its lead. It is no bad thing for the consumer that charges are more transparent and pension products more flexible. But let us not lose sight of the ultimate reason why anyone buys a pension – to amass as large a pot of money as possible. It is the investment return achieved by the assets invested that produces this pot of money.

It may be more than Government encouragement that is leading the focus on charges. Many IFAs who have tradit io nally specialised in pensions may be uncomfortable talking with clients about the specifics of investment perform ance. Product functions and features are solidly within their com fort zone as is, no doubt, assessing past performance charts. But past performance is only a small part of the story. Adv is ers need an in-depth knowledge of how and why that per formance was achieved before they can make an informed judgement as to where their client&#39s interests are best served.

Some firms will have individuals who provide this type of information to their colleagues but others will not. Perhaps it is this lack of resource, combined with lack of time to do the necessary research, which leads many to follow the line from the legislators and concentrate on charges to the detriment or exclusion of the most important variable.

This is yet another area where, unfortunately for many, big can be more beautiful. Bigger firms can have centrali sed resources to provide this type of supporting data to their advisers. Even smaller firms can usefully utilise specialist in-house investment expertise where it is available. However, many who have laboured exclusively in the pension field will not have this type of resource readily available and, with all the other pressures on their time, will not be able to create it.

It is possible to buy in such information but there are always competing demands for financial resources and the cost may not be perceived as justified. But if this is the only way a firm can arm its consultants with the tools they need to give advice, then the funds should be made available.

The traditional insurance companies are aware of this dynamic and, in an attempt to compete, have either out sour ced some of their investment management function and/or have attempted an internal refocus by hiving off their asset managers into separate corporate entities. More important, this is increasing competition in the pension market place by encouraging the entry into the fray of fund management groups which know they can offer pension products with the most crucial component – superior investment returns.


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