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RU64 row sparks fears of pension regulatory chaos

The FSA and Government risk throwing the pension market into disarray by

issuing contradictory rules for stakeholder.

Clerical Medical, Scottish Equitable, Scottish Mutualand Scottish Life are

at loggerheads with the regulator over whether it needs to change

Regulatory Update 64 which governs the sale of personal pensions ahead of

stakeholder&#39s introduction.

RU64 threw the industry into turmoil in April last year by effectively

bringing stakeholder-style pricing a year early. It outlines how the

consumer must not be “materially disadvantaged” if they trans-fer their

personal pension toa stakeholder.

Providers are adamant the publication of the Government&#39s final

regulations on stakeholder now makes the update invalid but the FSA denies

this.

Although the FSA failed to provide a succinct definition of what material

disadvantage means, it is widely interpreted as requiring a full transfer

value to be provided.

This favours high early transfer personal pensions to the detriment of

high-maturity-value versions.

But providers claim the regulations now say there is no need to provide

high early transfer values and the costs incurred in setting up and running

a scheme can be recouped if a policyholder tran- sfers their plan.

Scottish Life communications manager Alasdair Buchanan says: “Given the

signif- icant changes that have taken place in Government thinking, it is

essential the regulator reflects these by revising RU64 or it will be out

of step with Government thinking.”

An FSA spokeswoman says: “RU64 is absolutely still valid and correct. A

consumer must not be materially disadvantaged.”

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