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The Government must take that kite and learn to fly it

I read with interest David Dunn&#39s comments on kitemarking (Money Marketing, February 19) and his concerns about some people buying stakeholder pensions which are unsuitable for their needs.

In my view, there are two types of pension investor. The first is looking to maximise every nook and cranny of tax relief available on pensions, is keen to debate with their financial adviser the pros and cons of index-tracking or hiring a "superwoman" to manage the investments actively and wants to dovetail the pension scheme with an existing financial portfolio. The second, with whom ordinary mortals will more easily associate, just wishes to set aside a little current income in a secure home to provide for retirement.

Surely, then, we should have two approaches to pension planning to meet these very different needs? I would call the first a regulated sale, the second a regulated product. The Government will call the first a personal pension, the second a stakeholder pension.

The difference is obvious once you have seen it, yet it remains a revelation of Damascene proportions for many. Still more are confusing the two, seeking to edge extra complications into stakeholders and blurring the distinction.

It is because stakeholder pensions are universally suitable that kitemarking will work. Government wants us to be responsible for our own welfare – all the responsible consumer will want is a simple, good value account to set aside a little current income until retirement. For a basic level of pension provision, customer need is the same across the whole population, so we can dispense with the need for tailor-made "best advice" and, instead of regulating each sale, we can regulate the product once only, unlocking vast economies of scale.

But we mustn&#39t allow kitemarking to blunt the competitive edge of a free market, which over the past 10 years has brought visible benefits as successive generations of personal pension plans have brought improved value to customers.

First, the kitemark must confirm not just the quality of the product but also its clarity. While many investors will rely on the sign of the kitemark – and, indeed, they can confidently do so – others will shop around. The kitemark should only be awarded to transparent products so that consumers can make the comparisons without the need for actuarial assistance.

Second, the group nature of stakeholder pensions will mean that the group&#39s organiser, whether an employer or one of the expected new groupings, will act as a super-customer. Here, in fact, is the need for regulated advice and the group organiser will need the services of an independent financial adviser to construct the framework of the stakeholder pension scheme with components from the investment, administration and insurance markets.

The Government should not fight shy of the work and responsibility that kitemarking involves. Labour invented the term stakeholder and it will remain as closely associated with them as the red rose. What kitemarking offers them is the opportunity to ensure that the values brought from the association are ones they are proud to have.

Adrian Boulding

Pensions strategy director, Legal & General, Tadworth, Surrey


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