Don't despair, the work is out there,you just have to look carefully. Some
smallerIFAs seem dismayed at the potentially adverse impactof stakeholder
pensions on their business.
They point to the much reduced capacity of commission under stakeholder
when compared to personal pensions and correctly infer that it will be very
difficult to justify selling a new £100 per month personal pension
which has a significantly more expensive charge and commission structure
In my view, this is too pessimistic by half. There is very significant
potential for new pension business as a result of the Government's pension
initiatives but we will all haveto be prepared to adapt if we are to
survive and prosper.
The corporate pension market is clearly set for take-off. Every employer
with at least five employees will need to review its pension arrangements
to ensure it is compliant with the new legislation by October 8, 2001.
At the very least, this could involve changes to eligibility conditions so
that an employer with an existing occupational pension scheme or group
personal pension iscovering all of the workforce who must be offered
something. If it is a GPP, it could involve increasing the employer
contribution rate to at least 3 per cent or the employer must be prepared
to offer stakeholder.
Employers with at least five employees who do not currently offer any kind
of pension are going to have to do something.
Hopefully, many will decide they really want to introduce a “proper”
pension scheme and not just facilitate stakeholder with all its associated
Even if the employer is simply seeking reassurance that it is compliant,
that will involve a compliance audit and documentation which can be
produced if anyone ever complains to the Occupational Pensions Regulatory
Authority. That is a service for which the IFA can justifiably charge a
IFAs involved with a particular employer could also check the pension
arrangements for directors and senior executives, and the risk benefits.
All this is without evenconsidering the possibilitythat employers with
existing defined-benefit schemes will be seeking to restructure into some
form of money purchase.
There will be plenty of scope for individual business as well. Think about
the spouses, children and grandchildren of the IFA's exist-ing client bank.
Remember that standard-rate tax relief is available for stakeholder and
personalpension contributions up toa gross £3,600 per annum,
irrespective of age and without any earnings having tobe demonstrated.
However, some care will be needed here to make sure the concurrency rules –
whatever they turn out to be – are not broken.
Think also about the fallout from decision trees. There are going to be a
lot of moderate earners who have gone through the decision-tree process and
come out knowing that they need individual advice which will not be
provided in the workplace.
They are unlikely to be prepared to pay fees but I hope the final version
of decision trees may cause them to realise they need individual savings
accounts, life cover, or sickness cover, even if pension provision is some
way down their personal agendas.
Finally, don't forget that a key plank in the Government's strategy is
increasing the general level of public awareness of pension and other
financial planning issues.
Given how many peopleare going to get this wake-up call about their
finances – perhaps through combined benefit statements – it is hard to
believe that competent anddiligent IFAs can be short of work in the
Perhaps those who doubt this just need to concentrate on a clear business
focus to ensure work is prioritised to makeit as profitable as possible.