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Threat to trackers&#39 stakeholder links

Tracker funds as an external fund link on stakeholder could be under threat if the charges on their underlying investments exceed 1 per cent at any time, warns the Investment Management Association.

The alert comes as the Department for Work and Pensions refused to budge on letting firms charge more than 1/365ths of 1 per cent a day through either the fund link or its underlying investments.

The IMA (formerly Autif) says this is of major concern where there are links to tracker funds, because they automatically invest in FTSE investment trusts which pushes charges above 1 per cent.

It has now issued an urgent warning to members, saying they will have to calculate compensation to investors before April 5 while it tries to sort out a solution with the Department for Work and Pensions.

Product providers have been locked in a stand-off with regulator Opra and the DWP about getting some leniency on the rules for some time but to no avail.

Opra says it has had no sign of easement from the DWP on this issue. It will not allow fund charges that exceed 1 per cent to be offset by a monthly rebate.

Legal & General pensions marketing director Andy Agar says: “We are aware of the issue. Our legal opinion says this is not how the regulations should be interpreted and we are not infringing the regulations. We are happy to proceed as we are.”

IMA senior technical adviser David Broadway says: “This does make things difficult for holding tracker funds through stakeholder because they hold investment trusts within them.”


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