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Now pension firms have to grow their own decision trees

Pontius Pilate would have blushed.

The FSA has decided to wash its hands of decision trees on stakeholder

pensions. After months of trying to get something which cannot work to

work, it intends to pass responsibility for this tortured piece of timber

to the pension companies.

The precedent was set by the Government which initially passed the buck to

the FSA. Indeed, in recent months, the FSA has become a policymaking body

as half-baked ideas are sent down the Thames to Canary Wharf for poor

Howard Davies to sort out. Yet, in this instance, even Howard has failed.

The problem with decision trees is they should help people make informed

decisions but were thought up to get the Government out of a hole of its

own making as it imposed unrealistic charging constraints on the pension


The trees were dealt a severe axe blow by research suggesting many in the

stakeholder target group were better off not saving because of the

means-tested minimum income guarantee. The convenient solution was simply

to forget about the guarantee and leave it out of the tree, pretending the

benefits system had no bearing on retirement planning at all.

Now the pension industry is being asked to come up with a solution where

the best brains at the regulator and the Department of Social Security have


As pension companies grapple with their own decision trees, here is one

piece of advice on their design. Make a decision tree that comes up with

the only intelligent answer to retirement planning – go and see an IFA.


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