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Tough rules on stakeholder capital

Small product providers will be frozen out of the stakeholder market,


leaving a handful of giant players, if PIA capital adequacy proposals are


implemented, according to leading life offices.


The new rules which are outlined in consultation paper 31 require


companies to meet stringent criteria to become authorised stakeholder


managers.


The paper states that companies will have to demonstrate that they can


cover the first three years of a stakeholder scheme&#39s projected losses in


addition to the standard requirements on financial resources set out by the


PIA.


The report also requires product providers to demonstrate the effect of


the costof stakeholder until they become profitable.


Conservative estimates predict this could be anything from eight years


upwards although the maximum estimate is as long as 20 years.


Clerical Medical pens-ions strategy manager NigelStammers says: “The PIA


areclearly worried about the impact of stakeholder on the financial


strength of companies. I would imagine if thePIA is not satisfied with a


company&#39s loss projections, it could refuse registration.”


Standard Life assistantgeneral marketing manager Colin Ledlie says: “The


industry is expecting the stronger, bigger companies to service the


stakeholder market. They will need the resources to succeed.”


Scottish Mutual pensions development director Leslie Gray says: “The


freezing out of certain players is the way that it has been going for a


while. The stronger mutuals and companies with access to shareholder


capital to draw on will succeed. The withdrawal of Scottish Provident from


the market bears this out.”


FSA spokeswoman Jackie Blyth says: “The reason weare consulting on capital


requirement is to try and find the best way forward.


“Nothing has been set in stone but what we have done is based on what is


best for consumers.”

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