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Mass transfer pension peril

Some of the UK&#39s biggest pension providers offering high early transfer

value plans face losing billions of pounds as stakeholder makes its full


Those at greatest risk include household names such as Scottish Amicable,

Scottish Equitable, Scottish Mutual and Standard Life.

Under their obligation to give best advice, IFAs are compelled to

investigate switching their clients from higher-charging pension policies

to stakeholder-friendly plans which may have lower charges.

But because of the higher values provided on transfers and the levels of

commission offered to IFAs, many of these plans will not have made a profit

for the provider.

Standard Life alone has written nearly £1bn worth of business under its

Fair Deal For All pension plans since their launch in 1996 and faces the

threat of losing much of this pension business as IFAs switch their

customers to lower-charging stakeholder schemes.

Even if the life offices retain the transferred business, they will still

have to face up to the fact that it will take them much longer to recoup

their costs under stakeholder.

The threat comes because IFAs must consider moving their clients&#39 pension

plans under their obligation to provide best advice.

But, in addition, many must also act or face losing the scheme to a

predatory IFA who tells the client he can obtain better terms.

IFAs believe providers are stuck between a rock and a hard place, having

made the decision to offer high transfer schemes but now they must offer a

lower-charging stakeholder plan or lose even more money and market share.

Maddison Monetary Management managing director Mark Howard says: “All IFAs

should be reviewing their pensions book to ensure they are not

disadvantaging their clients under the new stakeholder rules.”

Standard Life assistant general manager (marketing) Colin Ledlie says: “We

are confident that we will retain the vast majority of our business and any

cost will be kept to a minimum. If people do move between our plans we will

still recoup our money from them but just in a diff-erent shape.”

Scottish Equitable pensions development director Stewart Ritchie says: “It

is very difficult to plan with any confidence and having good financial

strength is now even more important.”

Scottish Life head of communications Alasdair Buchanan says: “One of the

reasons that we did not go down this route was the pot ential danger of a

change in the market causing clients to switch en masse.”


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