View more on these topics

Stakes and ladders

Confusion is widespread as employers struggle with stakeholder.


Employers are holding out until the general election before tackling stakeholder, fearing a possible change of Government could mean a change in stakeholder.


Opra is concerned that stakeholder legislation on employers advising on pension schemes is being misinterpreted and employers are calling for clarification.


The debate has been stoked by rec-ent Liberal Democrat calls for the Government to scrap the “obligation for employers to provide financial advice”for stakeholder.


Opra chief executive Caroline Instance says: “Employers should tell their employees this is the designated stakeholder and pass on details of the scheme. Employees can then choose whether to join.


“Employers should not say employees should have a stakeholder and should not give advice as they are not trained for it.”


But LibDem trade and industry spokesman Vincent Cable says employees are relying on employers not just to administer stakeholder pensions but also to provide a range of options, effectively offering financial advice. He says: “If employers are doing all the background work, then the implication is they will be providing a selection of pension options.”


Industry bodies are concerned that employers could suffer a backlash from disgruntled employees unhappy with the performance of the chosen pension plan.


Federation of Small Businesses deputy head of press and Parliamentary affairs David Hands says: “Pensions are a complex business and employers will have to set down and propose a scheme agreed by employees. If the scheme does notwork as well as it might, the employees will criticise the employer for not choosing the best scheme.”


Rather than putting the onus on employers to provide stakeholder options, the Institute of Directors believe it should be down to the employee to arrange their own pension provision. Deputy head of policy unit Richard Baron says: “The idea of stakeholder is great as it encourages people to get pensions but employers should not have to get involved with pension provision if they choose not to.”


A major concern is that employers have too much paperwork already to be able to effectively deal with stakeholder.


Opra is advising employers not to sign up to a pension until April 2001 – the time when the full range will be available. However, David Franklin chairman David Franklin – whose air freshener manufacturing company employs 11 people – believes companies are aware but are postponing making any decision until the next general election has taken place. He believes the election could mean changes to the stakeholder legislation and it would be “foolish” to make plans until then.


He says: “We are looking at stakeholder pensions but we will not bite the bullet until after the election when we will find out what really will go ahead. It is a complicated scheme and I think anyone making a decision now is foolhardy.”


The idea the Government&#39s plans for stakeholder are still subject to change has been emphasised by the exclusion from the scheme of employers with fewer than five employees. Although industry bodies welcome this exemption, not all of them believe the Government is doing enough. Baron says: “The exemption is good but not good enough. We want the obligation to be scraped altogether but at least this shows the Government has budged and might budge a bit further.”


The complicated stakeholder legislation could also confuse employers. Confederation of British Industry policy adviser Mark Thomas says focusing on each individual regulatory impact should be easy for employers to grasp but the idea of companies dealing with all aspects at once is worrying.


The CBI wants to ensure the legislation is implemented with a light touch to reduce the burden. Thomas says: “It will take time for employers to get used to the new system. It will be a steep learning curve and we look to Opra to take this into account.


“Opra can be quite rigorous in the way it inflicts deadlines for contributions but I would hope it will allow for the fact that employers will need time to learn as it would be counter-productive to clamp down on people in the initial stages.”


Opra agrees it needs to approach stakeholder carefully and says its first priorityis to ensure employers fully understandthe designation process. Instance says the intention is to educate first and then follow up on complaints. Guidance will be avail-able to employers needing help but repeat offenders will face punishment.

Recommended

Supermarkets won&#39t make a clean sweep

Beyond ease of access and lower charges, supermarkets offer nothing new and investors will continue to need advice.The past few months have seen the launch of a number of fund supermarkets, notably Fidelity&#39s FundsNetwork.The CoFunds supermarket is due to open in November, while Skandia&#39s multifundshop went online during August.I find it interesting that not all […]

Schroders profits increase 41 per cent

Fund manager Schroders has announced a 41 per cent increase to £129.5m from £92m in pre-tax profits in the six months ending June 30. The increase is primarily due to growth in its private equity arm, which saw an increase to £50m from £14.9m in the first half of 1999. Its asset management arm grew […]

Banking on Stakeholder

HSBC – Personal Pension PlanType: Stakeholder-friendly personal pension offering a range of unit-linked funds.Minimum premium: £20 single or monthly.Minimum group size: Five.Minimum-maximum ages: 17-70.Fund links: Secure, fixed interest, FTSE All Share, international.Charges: Annual 1 per cent.Allocation rates: 100 per cent.Minimum term: None.Options: Life cover and waiver of premium.Commission: None.Tel: 0800 520 420.Broker Panel:-Michael Posner – […]

IFAs attack &#39misleading&#39 Prudence literature

Prudential has come under fire from IFAs who claim its latest marketing material for its with-profits bonds is misleading.IFAs say Prudential&#39s Prudence bond literature makes invalid comparisons between the bond and a building society account.Prudential describes its bond “as boring as the building society”.But advisers say this is misleading because the bond is not as […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com