of stakeholder. Thereafter, providers will be required to disclose precise cash amounts.
It is likely that the industry will be divided over the method of the disclosure of charges adopted in the early years. This gives the Government the ideal opportunity to assess how helpful members find cash disclosure in practice, before making any final decision.
Another change to the regulations covers the dealing costs of collective investment - a highly technical point.
The regulations specify that
the scheme is not allowed to charge above the one per cent cap except for certain purposes (listed in Regulation 14 of the stakeholder rules). The most obvious example is that advice can be charged for on top of the one per cent, provided it is through a separate written contract. In addition, it is also permitted to deduct "stamp duty or other charges … incurred
directly in the sale or pur-
chase of securities or property
held for the purposes of the scheme". The "other charges" include dealing costs.
The DSS letter states that the amending regulations will clarify that where the stakeholder scheme invests through collective funds, "dealing costs incurred by collective investment schemes in the sale or purchase of underlying assets" can also be deducted on top of the one per cent.
Certainly, any clarification in this highly complex area would be welcomed. For example, what is the status where the collective fund incurs stamp duty or "other charges" other than dealing costs?
Cancellation rights and pre- sale disclosure are other issues. There will be two forms of stakeholder scheme - contract-based and trust-based. Contract-based, or personal pension stakeholder schemes will fall within the Financial
Services Authority rules on pre-sale information and cancellation rights. As the regulations currently stand, trust-based,
or occupational stakeholder schemes might not. The regulations will be amended to ensure that members of trust-based stakeholder schemes receive equivalent pre-sale information and cancellation rights.
Once every year, the trus-
tees or manager of a stakeholder scheme must make a declaration to the effect that the scheme has operated in line with the regulations. In addition, the scheme must appoint an auditor or reporting accountant who must also produce a statement regarding whether in his opinion it was unreasonable for the trustees or manager to make their statement.
The stakeholder registration form requires the name of the scheme's reporting accountant, which has proved problematic as auditors and accountants are understandably reluctant to sign up for this role without a full understanding of precisely what it will entail. As a result, I suspect that most registration forms submitted to the Occupational Pensions Regulatory Authority to date have had a "to follow" comment in that box. The amending regulations will cover the reporting accountant role in more detail.
Of all the amendments, surely the most controversial must be that of membership restriction. In my opinion this was also the least expected change. The initial aim behind stakeholder pensions was to ensure that everyone, wherever employed, and whatever their earnings, had access to a good value pension scheme. Thus, it was not surprising
that generally, stakeholder schemes were not permitted to restrict membership in any way.
One exception to that was that trust based, but not contract based, schemes would be allowed to restrict membership to employees of a particular employer or members of a particular trade, profession or organisation.