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Mistaken benefits

I read with interest Paul Rylett&#39s letter on stakeholder (Money Marketing, December 20). What he seems to be saying is that out of all the muddle and forced reduction of income for advisers, at least some good has resulted.

Some employers – definitely, I think, a small minority – have started money-purchase schemes of one sort or another into which they are to pay 3 per cent of payroll. As such schemes are exempt from the stakeholder straitjacket, the commission they generate may be just about sufficient to cover the costs of something in the way of advice to the members. Over, that is, the costs of setting up the scheme and ensuring it runs properly over the long term.

Without the shove of compulsory stakeholder designation, these employers would not have bothered with any sort of retirement benefit scheme for their workforce. And that&#39s about it. All this fuss, palaver and expenditure of public money for a few thousand 3 per cent schemes which otherwise would not have come about. Hooray. Big deal. Three cheers for you-know-who and his cronies at the Treasury.

Surely, there must have been a more cost-effective way in which the same ends might have been achieved without, for example, opening another loophole which enables wealthy men to set aside £2,808 a year plus tax relief into a tax-sheltered vehicle for their non-working wives? How about a 1 per cent of payroll tax rebate from the Government for the first two years of the scheme&#39s life?

Let us not forget existing personal pension policies on which commission levels have been all but decimated. The result is that £20 or £30 a month top-ups are simply not worth the effort to chase or the paperwork to document. So what happens? Nothing. The £50 a month policy stays that for ever.

Why have life offices allowed themselves to be steamrollered into pruning charges to the bone? The answer is easy. Most have got away for far too long with overpriced products, overpaid salesmen, rubbish administration and poor investment funds.

Having streamlined its charges but kept pretty well everything else as good as it already was, Skandia was one of the few companies in a position to stand up to the Government and the regulator&#39s bullying tactics and that is why it is now soaring above all others in the personal pension firmament. Norwich Union may have launched a zillion new funds and Standard Life may have bagged a bigger proportion of the stakeholder market but neither has what Skandia has and out here in the real world we all know it.

Julian Stevens Partner,WDS Independent Financial Advisers, Kingswood, Bristol

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