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Move over Darling

Alistair Darling, the dour Secretary of State for Social Security, and now Champion for Older People, caused a mild ripple of controversy at a private dinner recently.

In a neat interpretation of a Labour mantra, he revealed that stakeholder pensions are intended for the few, not the many. Or more exactly, that they “have always been intended for moderate earners and high-income earners”.

Excuse me? I hear you say. What was that? Aren&#39t stakeholder pensions meant to be for the masses, cheap and cheerful, off the shelf, no fringe benefits attached?

You are not alone. The industry as a whole has leapt on these remarks as a shift in policy. ABI director general Mary Francis suggested that the Department of Social Security was “covering its tracks”. National Association of Pension Funds chairman Alan Pickering hailed the remarks as “clarification” and “realism”.

Up to a point. Darling&#39s remarks may represent a shift, but only a subtle one.

The trouble stems from the fact that the only stakeholder soundbite that has caught on is that stakeholder&#39s target market was the 9,000 to 18,000 income bracket – certainly at the moderate end of the income scale, being below male average earnings. Further, the new pension will encompass children and non-working spouses, very much at the no income end of the market.

So you could be forgiven for thinking that Darling&#39s remarks signal a change in tone. Not surprising, given that the Government&#39s road to pension reform has been so long and winding it should be a number one hit. We started three years ago with Labour&#39s election. We moved through one Secretary of State, two ministers of state, three pensions ministers and at least nine consultations of one form or another. We have moved from a mutual, trust-based pension owned by its members to one that looks not unlike a significant number of personal pensions on the market today.

Understandably, in all this confusion, people have lost sight of what stakeholder pensions are actually for. Let me take you back to the launch, in February 1999, of consultation on pooled pension investments, which are one of the not so new investment vehicles available for both stakeholder and personal pensions.

At the time, the relevant Treasury minister, one Alistair Darling, remarked that “the Government aims to encourage moderate and high earners to take out funded pensions”. There it is again, that phrase “moderate and high earners”, but a full 14 months ago! What does it all mean?

It means that Alistair Darling, or rather the Treasury, have had their way. The sooner one learns that the Treasury has its way all the way, the easier life becomes. New Labour realised early on that stakeholder as constituted by them in opposition would never fly. It was too bureaucratic, too musty, too Old Labour.

The Government&#39s experience in creating Individual Savings Accounts and dealing with pension misselling left an indelible impression on ministers&#39 minds that financial products were too complicated and that some sort of product regulation was required. Given that stakeholder pensions were already in the public domain, the simplest way forward was to use this existing vehicle as a way of reforming the personal pension – and, as with Isas, breaking with the past. When Darling moved from the Treasury to the Department of Social Security, the change in thinking was complete.

So it is that a stakeholder pension is, in reality, a reformed personal pension, the key point being that the Government has intended this for almost a year and a half. A U-turn it is, but it did not happen last week. Which is why, perhaps, one official to me dismissed the furore over Darling&#39s remarks as a “storm in a port glass”.


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