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Manipulating pension sales

I agree wholeheartedly with Ned Cazalet’s claim that life companies are manipulating their new business reporting.

The aim is, of course, to produce figures that they can trumpet to the industry as an indication of how big and strong and successful they are in the hope that this will engender confidence in the marketplace and hopefully some real new business.

Nowhere can this more easily be done than with group pension schemes.

For example, employee A leaves a company and its pension scheme after two years of membership. Employee B is recruited to replace him on more or less the same salary and after six or 12 months, joins the pension scheme in place of employee A.

Employee A, meanwhile, has transferred his fund away to his new employer’s retirement benefits scheme.

Overall contributions to the scheme are unchanged but, hey, this a new member paying new contributions with some new business commission payable to the advisory firm which introduced the scheme in the first place. Ergo, this must be new business so let’s include it in our figures that we report to the world at large and hope no one rumbles the con.

No one these days is embarking on an endowment as a regular savings vehicle. Bond sales must be in serious decline, except perhaps in conjunction with IHT planning.

Nearly everyone just wants out of with-profits as soon as they can do so without being stung with an MVR and, as we all know, the populace at large is becoming increasingly turned off pensions. They may be just about worthwhile for higher-rate taxpayers or if the employer is contributing but for anyone else, they are a duff deal.

So, from where are life companies getting all this new business they are so busy crowing about? Certainly not from the likes of me. It is, as Ned says, all going to open architecture products underpinned by unit trusts. The dinosaurs have had their day.

Julian Stevens




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