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MVR move keeps WP option for stakeholder

Product providers will be able to continue to offer with-profits within stakeholder pensions after amendments to DWP regulations accepted the need for MVRs to be calculated outside the charge cap.

The ABI and individual companies have been lobbying the Government after fears mounted that MVRs would have to be included within the 1.5 per cent charge cap from April 6.

The new rules are a continuation of the existing regime but providers were concerned that any change would effectively have killed off with-profits as a stakeholder pension investment.

Norwich Union head of pensions Iain Oliver says the industry convinced the DWP that MVRs were essential to the smoothing process rather than a back-end charge. NU is particularly relieved as it is one of the few insurers to offer with-profits as its stakeholder default fund.

The DWP has said it will not proscribe the wording of the pros and cons of lifestyling, a message that providers must deliver to investors between two years and no less than four months before it starts – five years before retirement. This means that providers themselves will be left to design their own lifestlying products as well as the way they are communicated to consumers.

Members leaving a 1 per cent scheme for any reason and later rejoining after the charge cap rise comes in next month will be subject to the 1.5 per cent charge, as they will be deemed to be new customers and not continuous members.

Oliver says: “It has been pretty uncertain and it is interesting we have managed to satisfy the DWP that an MVR is an adjustment of inv-estment performance and not a back-end charge.”

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