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Pension credit plan is boost for stakeholder

The Government has given stakeholder a major boost by allaying fears that savers would be penalised by the minimum income guarantee.

The move means the stakeholder target group – those earning between £9,500 to £21,600 – can save without fear of being punished for prudence.

On Monday, Social Security Secretary Alistair Darling unveiled plans to reward people saving for their retirement by saying that those people who fall marginally above the Mig would not have their savings undermined by means-testing.

The proposal is being welcomed by the pension industry but some experts claim it could still mean a planning dilemma for advisers until the changes allowing for pension credits become law.

The details of pension credits will be revealed in Parliament this autumn but its known capital limits will be abolished and the income pensioners receive from their savings will be the basis for means-testing.

Scottish Amicable director (pensions development) John Glendinning says: “This news is a significant help to those put off saving by the Mig but it relies on the assumption that future Parliaments will not change it.

“It is now an issue for the FSA to ensure that decision trees give the best possible information.”

Scottish Equitable pensions development director Stewart Ritchie says: “The fundamental question remains – can anyone put their hands on their hearts and say to these people, &#39If you pay into a stakeholder you will definitely benefit&#39?”

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