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NAPF wants citizen’s pension and an end to means testing

The Treasury has refused IFAs the right to appeal against Financial Ombudsman Service decisions but test cases may be allowed to go to court.

The Treasury has comp-leted its review of the Financial Services and
Markets Act 2000 and says both the financial services industry and
consumer bodies believe the FOS is doing its job well.

Treasury Financial Secretary Stephen Timms says there will be a
number of improvements but concludes that an appeal mechanism would
be “unattractive”.

However, he says the FOS is considering allowing test cases to go to
court in spec-ific circumstances, such as when a point of law is
involved. This procedure could replicate the system used by the
ombudsman service before the FSMA.

The FOS must call in exp-erts to decide whether a case might have
wider implications for the industry.

Circumstances in which cases can be passed from the FOS to the FSA
will also be more clearly defined.

Timms promised a number of improvements to reduce the compliance
burden for financial services firms.

Timms says: “Appeals would add to the complexity and length of the
FOS process, would deter many consumers from approaching the FOS in
the first instance and would generate additional costs.”

Michael Philips proprietor Michael Both says: “IFAs have had the
odds stacked against them which I do not think is fair but on the
other hand we have to be careful to keep costs down.”

The NAPF is calling for contracting out and means testing to be
abolished and replaced by a simple and standardised citizen’s pension.

It believes that the current state pension system should be replaced
with a 105 a week flat-rate pension rising in line with
earnings and that any private savings above that figure should to be
used for private retirement provision.

Chief executive Christine Farnish says current Government pension
spending would be sufficient to cover the cost and its plan could be
in force by 2010.

Farnish says pension cre-dit is only claimed by twothirds of those
eligible and despite Government initiatives, about eight million
pensioners get less than the 105 a week they would with the
citizen’s pension.

He says: “Means testing is expensive to administer and it
discourages people from saving. Contracting out adds to the
complexity of our system.”

ABI head of pensions and savings Joanne Segars says the erosion of
the incentives to contract out have made it a less attractive option
but the Government should look to reform contracting out rather than
abolish it.

Segars says: “The answer to current uncertainties over contracting
out is not abolition but reform. There is a powerful case for
building on the current system so it is simpler to operate and
encourages more saving.”

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