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Turner turning the screw on industry

The Pensions Commission’s final report is a disaster for the financial services industry and would force product providers into deeper cost cuts than the introduction of stakeholder and drive IFAs out of the equation.

Advisers and life offices have lined up to slam the proposals which were released on Tuesday by commission chairman Adair Turner. The plans would see providers having to slash charges to a level that could not fund advice.

The proposals for a Nat- ional Pension Savings Sch- eme with a 0.3 per cent ann- ual charge mean that the private sector would be priced out of the group personal pension market, effectively killing off GPP and group stakeholder business.

Employers wanting to opt out of the NPSS would have to match the terms it offers, so any employer opting for a scheme with a higher charge than 0.3 per cent would have to make up the difference through increased contributions. To keep a stakeholder scheme with a 1 per cent charge, the combined contribution would need to be 9 per cent.

Standard Life head of pensions policy John Lawson says the Turner report’s proposals are a complete disaster for the industry, cutting advisers right out of the market.

But the Pensions Commission has hit back at criticism, saying a pension scheme run on a 0.3 per cent annual fee would give individuals pensions around 30 per cent higher than current stakeholder charge levels.

Scottish Equitable pensions development director Stewart Ritchie says: “Turner’s target of a 0.3 per cent charge for the running of the scheme is heroic. It is good to be optimistic but he has to be realistic. There is little scope for advice within this charge.”

Scottish Life head of pensions strategy Steve Bee says: “Our employer-supported pension system is under threat by the proposed NPSS scheme. Why do away with something that is cost-effective relative to other forms of savings without taking into account the benefits of tax relief? BritSaver is only superficially appealing.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “I would question whether Lord Turner’s propo- sals will ever get off the ground.”

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