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Kelly says &#39very good&#39 reason needed to rethink price cap

It will take a “very good” argument to convince the Treasury of the need to raise the 1 per cent price cap on stakeholder charges, according to Treasury Financial Secretary Ruth Kelly.

While not ruling out a change to the charging cap, the minister said the Treasury has adopted a very high threshold to persuasion over changes.

Speaking at the Treasuryhosted seminar on the Sandler review in London last week, at which the Government confirmed it plans to push forward with the creation of a new range of safe-haven products, Kelly was bombarded with questions about the price cap.

Virtually every question from representatives of life offices, friendly societies and fund managers made the case for a higher price cap but the minister was not swayed by the arguments.

Kelly said at this stage any debate about the price cap is an academic one as the structure of the products and how they will be distributed has yet to be determined.

She said: “One per cent has a huge inherent attractiveness to it. It is easily understood, simple to convey and to communicate. I am not ruling out any changes but there would need to be very good arguments to change our minds.”

Sofa managing director Brian Lawless says: “The minister said she feels 1 per cent is right. Are they really basing a multi-billion-pound industry on someone&#39s feeling? I would challenge the Government to produce its findings demonstrating that they have costed 1 per cent.”

ABI head of life insurance Francis McGee says: “In her remarks, the minister was keeping her options open at this stage. We have got the agenda focused on the price cap. The Government is open to persuasion and we have now got the job to persuade them.”

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