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Around two million people in the Government&#39s target group for stakeholder already have a personal pension and might consider transferring to a stakeholder plan. Yet it is estimated that fewer than 1 per cent of consumers with personal pensions have switched. This is a huge group of people who could gain by moving from old-style products with high charges and limited investment options to plans with lower charges and superior investment potential. Their advisers could also benefit by moving a large part of client portfolios to fund-based commission.

This is not just about transferring to another provider. Analysing a client&#39s circumstances may identify that it would be better to leave existing monies where they are but redirect ongoing contributions or increments to another provider.

There may also be technical reasons to consider switching some clients into a personal pension from another type of plan. A client may no longer be in the most appropriate product to meet their needs. If a plan was taken out some years ago, benefits may be improved by switching to a personal pension. Some instances where benefits could be improved include:

•For individuals holding an s226 retirement annuity contract, death benefits may be improved by switching, as a personal pension will return the fund on death. Death benefits from the existing plan may not be as generous.

•Where clients are eligible to take advantage of concurrency, the level of tax-free cash available may be increased by moving from free-standing additional voluntary contribution plans. By switching to a personal or stakeholder plan, a client would be eligible to take 25 per cent of the fund value (from new contributions only) tax-free on retirement, a benefit not available with an FSAVC.

The Pension Green Paper will have an impact on these last two points and the implications will need to be considered as and when new legislation comes into effect.

•Some executive pension plans set up for working spouses run into overfunding problems caused by low salaries not being reviewed. It may be that the employer can switch ongoing premiums into a personal pension and pay up to £3,600 a year without incurring these problems.

In addition to the cost and technical aspects of transferring, there are a number of other issues that should be taken into account.

Financial strength and with-profits performance are important considerations when choosing a provider. There are fewer providers in the market now able to meet the financial challenges ahead. Clients and their advisers need to be certain that companies will survive to pay out benefits in 10, 20 or even 30 years.

Investment options and the performance of the existing provider should be compared with leading competitors.

Transfer penalties may mean that switching is not worthwhile. The length of time with the existing provider and years to retirement need to be considered. Typically, the earlier the decision to switch and the longer a client has left to contribute, the bigger the potential gains are from switching.

Given that thousands of policyholders could improve existing benefits and/or reduce charges by switching, why are so few transfers made? As well as the high level of policyholder inertia, advisers have some concerns. The number of issues that need to be taken into account are not inconsiderable and the penalties levied on transfer need to be considered. Moreover, the subject of transfers is often perceived to be contentious. There is a perception that financial gain for some advisers has taken greater priority over benefits to the client.

Throughout the process, advisers should be identifying if a substantial gain could be made by switching clients&#39 policies. If a compliant process is put in place and followed, reviewing existing business may not be as much of a headache as first thought.

Even in instances where the analysis shows that a transfer is not advantageous, perhaps due to high exit penalties, an individual may still benefit by redirecting future contributions to a stakeholder-friendly product. In cases where a client has indexation, they would almost certainly benefit by stopping and investing somewhere else. This would enable them to maximise their retirement savings through a product with lower charges and/or better performance options.

By using the support available in the market, advisers will find the whole process quicker and easier. As well as the software systems available, providers offer a range of support material.

The market offers huge potential. There are large numbers of individuals with a wide variety of existing products and charging structures. This presents a prime opportunity for advisers to add value to their clients&#39 portfolios by using the help available in the marketplace and by following a process built on compliance.


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