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Reasons why not letter encroaches on IFA territory

The stakeholder pension may not be compulsory for the public to buy but the FSA is determined to make it as good as compulsory for IFAs to sell.

The high-flying directors of the FSA must realise the stakeholder pension is not infallible. But in consultation paper 61, the proposed reasons why not letter looks set to be worded as if the pension can miraculously meet virtually all the UK&#39s retirement needs. In the process, the regulator is considering unprecedented interference in the way IFAs advise their clients.

In recent months, one of the most pressing questions about stakeholder pensions was how much of a personal pension market could exist outside the Government&#39s strict kitemarked regime.

It was widely thought that those who chose to seek advice by paying more, who wanted access to packaged insurance cover or greater investment choice could opt for a personal non-kitemarked pension. This risked busting the 1 per cent charges dictat but clients would have had the choice.

But life offices believe the reasons why not letters come close to forcing IFAs into the “confession” that stakeholder is best. Stakeholder has brought downward pressure on pension prices and the pension itself will be appropriate for some people but there are a dozen reasons why it may not be the best option for everyone. But backing a prescriptive pension with prescriptive regulation risks forcing IFAs into false confessions.

The FSA must be very careful that, in trying to avert misselling of personal pensions, it does not encourage IFAs to missell stakeholder instead.

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