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Stakeholder cap deters IFAs from advising companies

IFAs are being put off from advising on company pension schemes by the 1 per cent stakeholder cap on commission, according to research by Scottish Equitable.

Seventy-five per cent of IFAs questioned at 15 ScotEq roadshows across the UK in November said they would actively target employees if the cap was raised to allow more scope for promotion of the product.

The research also confirmed earlier ABI statistics showing the failure of take-up of stakeholder pensions in employer-sponsored schemes. Only 25 per cent of IFAs questioned said more than half the stakeholder shells they set up had any members.

Where members were paying into a scheme, 76 per cent of IFAs said employee contributions were less than 5 per cent of earnings.

Pensions development manager Margaret Craig says: “Our research confirms that stakeholder pensions have yet to make a significant dent in the savings gap.

“Whatever the actual size of the savings gap, there is no doubt that a gap exists. This was acknowledged in the Pensions Green Paper, which emphasised that individuals must take responsibility for their own retirement.

“Clearly, something needs to be done to overcome the inertia. It is significant to see that three-quarters of IFAs would be prepared to go out recommending that employees join their employer-designated scheme if there was more scope to pay for advice.”

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