Regulatory Update 64 was introduced in the run- up to stakeholder pensions to ensure that consumers were not locked into pension products with signif-icantly higher charges than stakeholder. It then morphed into the “reasons why not stakeholder” rule requiring an adviser who recommends a personal pension or free-standing AVC to explain in the suitability letter why it is at least as suitable as a stakeholder pension.The industry, fearing another misselling review, interpreted this as meaning that charges on all pension contracts had to move to stakeholder levels. But the stakeholder price cap was never intended to cover full advice costs and is particularly inadequate for those with modest amounts to invest and so the decline in availability of individual pensions advice began. Individuals do not voluntarily save for retirement unless they are advised to do so. This will not change without a dramatic shift in savings culture and/or overall levels of financial capability. Stakeholder pensions have proven that introducing low-cost products does not, in itself, increase pension saving. Basic advice will not generate major increases in pension saving so it is vital that the provision of full advice becomes more viable for a wider range of people and this means having pension products cover the cost of advice. Some will argue that any increase in pension charges has to be bad for consumers but this is short-sighted in three ways. First, it ignores the long term trend – charges were falling before stakeholder and competition and technological advances will continue to apply downward pressure. Second, advice is valuable, and needs to be paid for. Third, it implies that charges are already too high. On this last point, Aegon UK sponsored some academic work which showed that at 1 per cent or even 2 per cent charges, it pays to save. So a modest increase in charges is not wrong or unfair. The key is ensuring that the market evolves in a responsible manner, with increases in charges applying only where required to cover advice costs. Today’s market environment should ensure that this happens and the FSA’s consultation identifies recent initiatives which will help. With the payment menu, consumers and advisers will discuss at the start of the advice process the services that the adviser can offer, their likely costs and the payment options – fee, commission or a combination of both. The FSA also highlights the clear charging structures among Raising Standards’ accredited brands. This will continue under the evolution of Raising Standards. The Treating Customers Fairly initiative should ensure that all providers, whether or not within Raising Standards, continue to offer transparent products and charges, ensuring consumers continue to be protected against excessive charges. In addition, broader conduct of business rules will still require advisers to recommend the most suitable product from their range. Whole-of-market advisers and IFAs will continue to have to take into account stakeholder pensions alongside other pension options. The regulator correctly observes that this will not apply for limited-range advisers who do not have a stakeholder pension in their range but this issue is not specific to stakeholder pensions as it is a basic feature of limited-range advice. The FSA’s project to improve financial capability is also highly relevant here. Any initiatives – whether they are by the Government, the regulator or the industry – which focus on helping consumers improve their understanding of, and engagement with, financial services must be welcome. The FSA expects some increase in pension charges as a result of removing RU64. Some, but by no means all, consumers will see charges increase where this is required to pay for the level of advice they need. Others may pay the same but with a different time profile. But, if RU64 were retained, these consumers might not be given this choice. They would simply not have access to advice. Surely, a selective and modest increase in charges is more than offset by the added security in retirement provided by pensions recommended by appropriately qual- ified advisers. But there will be no blanket increase. Some pension products have charges below the cap level, particularly group arrangements, where the amounts invested are significant or where the adviser operates on a fee basis. RU64 restricts not only the level but also the shape of charges. Fund-based charges (whether at 1 per cent or 1.5 per cent) provide very little up front but many of the costs occur up front. It is likely that we will see some change in charging shapes as well as levels. Five per cent of contributions plus 1 per cent of fund is broadly equal to current stakeholder charges, but this shape would help providers and advisers handle more modest cases. Building on the existing Raising Standards and under Treating Customers Fairly, product providers will pay more attention to which types of customers are buying which products, particularly where the product may be more complex or include features or charges which may make it less suited to certain customer types. A positive outcome would be an environment where advisers could offer their clients a choice – buy a stakeholder product but pay for uncovered advice costs through a fee top-up or opt for a personal pension with higher charges but which fully covers advice costs. These options could be brought out within the payment menu or supporting discussions. An FSA endorsement of this approach would be particularly helpful in encouraging a move in this direction. The FSA is considering responses to their consultation paper. I remain hopeful they will go with their instincts and remove the RU64 rule. In doing so, they will be making it clear to the market that, in some cases, it is acceptable to charge more than the stakeholder charge cap to cover the cost of advice. This should allow adviser firms to consider their future approach to advising on pensions – to whom, on which products and by using the menu, the basis for charging for this advice. This will lead in turn to increased pension savings which – unless you are a robot – we all need.