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Life offices to shun &#39safe haven&#39 if cap stays at 1%

Norwich Union chief executive Philip Scott is threatening to shun Sandler&#39s proposed stakeholder suite of safe-haven products unless the 1 per cent price cap is revised.

Lloyds TSB, Standard Life, Friends Provident and Scottish Life have also added their voices of dissent to the proposals, which could leave the Government launching products that providers are unwilling to manufacture or sell.

Scottish Life head of communications Alasdair Buchanan says Ron Sandler disappointed the industry by seeming open to arguments against the 1 per cent price cap but then proposing it for his new suite of safe-haven products.

Life companies say there would be no margin for distribution or advice and the price cap would sap their already depleted capital.

Scott believes some companies could be forced to close to new business within the year.

Friends Provident managing director Ben Gunn says Sandler&#39s proposals are self-defeating and will merely repeat what has happened with stakeholder pensions.

Lloyds TSB group chief executive Paul Ellwood stated his firm opposition to the price cap in the company&#39s half-year results.

Scott says: “The 1 per cent cap is not appropriate. It may be uneconomical to offer these products. If the products are capped at 1 per cent with no other flexibility around that, we may choose not to offer them.

“There may well be companies which choose to close to new business by the end of the year.”

Standard Life marketing director Michael Leahy says: “The price-capped products are not going to achieve what the Government intends. There is no point if nobody manufactures them and nobody buys them – they become an expensive irrelevance.”

Holden Meehan director Amanda Davidson says: “If the companies are going to stand up and act in unison, who is going to offer the contracts? Companies have got their fingers burnt with stakeholder. If consumers cannot pay for advice through the contract capped at 1 per cent then you are disadvantaging the consumer.”

•Comment, p27

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