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Life firms want more clarity on RU64

Life offices are calling for clarity on whether an RU64-style requirement will be imposed on Sandler suite products.

Scottish Equitable warns that an RU64 element could see providers forced to offer their own personal pensions at 1.5 per cent to compete with stakeholder.

The introduction of RU64 on stakeholder pensions forced advisers to justify their decision to chose a product other than stakeholder in a reasons-why letter. This saw many providers reduce their own personal pensions to 1 per cent, a strategy which exp-erts say is unsustainable.

The FSA says it is still reviewing whether RU64 will be included on the medium-term investment and pension product.

But Treasury financial secretary Ruth Kelly says the 1.5 per cent cap for the first 10 years will allow the cost of basic advice to be incorporated within the product charges which could indicate that there will be a charge for supplementary advice.

Liverpool Victoria group chief executive Malcolm Berryman says the cap concession will not go far enough for providers to invest in products where there is no certainty that customers will “stick” for the typical 15 years it takes the charges on the product to recover the cost incurred at outset.

Scottish Equitable head of business development Steve Cameron says: “Will advisers still have to apply a better than stakeholder test? If that happens, margins will have to be tightened. This is very much up in the air.”

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