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Present imperfect

As I write this, I cannot help but wonder what IFAs are wish ing for this festive season.

With just over four months to go until the most radical change in pension provision in the UK for a generation or more, stake holder business is sure to be top of the wish-list this Christmas.

Like Santa, product pro vi ders such as Scottish Amic able have been working hard all year gearing up for this new environment.

As all parents will testify, a driving factor behind presents is price. Stakeholder is no different and it is certain t
hat one of the key drivers of the market will be the price cap of 1 per cent.

Providers need to build significant volumes of business to deliver the unit costs necessary to compete profit ably in the market and e-commerce development has been enormously accelerated in financial services by the drive to reduce business costs for advisers, employers and provi ders alike.

In a sense, the introduction of stakeholder has been like having Christmas every day. It has all the right ingredients – a sense of excitement combined with palpable anticipation.

Of course, the stakeholder market will not be made by providers alone. We believe, especially in the employerdriven market, that financial advisers will dominate and that they have been drawing up their wish-lists, too.

The positives for group personal pensions have been well rehearsed. Advice costs within the product and better fund choice, including a range of managers, may justify a charging level higher than 1 per cent.

If our current business is a gauge of the future, advisers are presenting different pro positions to the market, with about half of them picking up that added-value proposition and the balance moving to stakeholder charge levels and possibly to stakeholder itself from April.

So, what about the new toy manufactured by the Trea sury? Individual Pension Acc ounts may make a nice Christ mas present but, like many gifts, IPAs may not be available in time for the “big day” (which is in April, of course). Advisers should not be surprised if they become the toy of the summer or even later.

As advisers have been drawing up their stakeholder Christmas lists, providers have had to move quickly and have been registering since October with a variety of pro positions in order to ensure they make their way into adviser&#39s hearts and minds.

But like presents from Santa, what actually goes on the list cannot be absolutely finalised since many aspects of stakeholder – not least the selling and regulatory regime – are still in draft form.

The role of IPAs may rem ain unclear for a little while as consultation develops further. But the basic principles, and the intention to deliver stakeholder, should become clearer.

But when Christmas is over, what resolutions will the New Year bring?

Will the business propositions of intermediaries in the market becoming more definite? One would think so, especially as thousands of employers will be expected to make pension provision for the first time. This is one resolution for them that cannot be broken.

The New Year will also bring new opportunities, with most existing schemes being reviewed, possibly leading to further new business, with the inclusion of employees not currently within the pension scheme operated by the employer.

Financial advisers have already been working with other professionals, such as accountants, to support the employer market.

They have also been promoting their solutions to the local market for many months through, for example, informative employer seminars.

But let us now look ahead to next year&#39s list. Just as one present makes it on to everyone&#39s list, some are not so popular.

The decline in the individual market has been pronoun ced over the last year or so and shows no sign of reversing. But there is no doubt that scope exists to promote individual sales either of exec utive pension plans or personal pensions.

The sell-by opportunity afforded by the change to waiver benefit and death benefit under personal pensions, along with the removal of carry-forward, all provide a short-term boost through to April next year – with a qualified extension for carryback combined with carry-forward to January 2002.

IPAs may provide a new marketing boost. The market for the spouses and children of high-net-worth clients is also beginning to stir.

The new tax regime features of the five-year presumption and cessation rules will generate many new selling opportunities. Plus, of course, EPPs , with their ability to absorb substantially higher contribution levels, will remain available through April 2001 and beyond.

So this time next year, when we all sit down to draw up our 2002 lists, what present will be top of advisers&#39 list?

No doubt stakeholder may, to some advisers, be just like a kid&#39s Playstation. They will have had it for nearly nine months, know how to play the games and have a growing desire to see what challenges lie ahead on the next level.

And Her Majesty&#39s Santa Clause may have more surprises in store for us too.


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