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Unions fear stakeholder misbuying without advice

Financial services unions have joined the ranks of providers and IFAs warning that stakeholder pensions will be misbought if sold without advice.

The Manufacturing Science and Finance Union, which has nearly 400,000 members, says it is wary of stakeholder being sold on an execution-only basis due to the risk of misbuying.

The news comes after the UK&#39s biggest union Unison warned that the TUC&#39s new stakeholder plan will not work without advice.

Lobbying group Alliance for Finance, which represents 18 finance unions and staff associations including Unifi, says Unison&#39s views are “widely shared” among the unions.

MSF finance department researcher Peter Judge says the risk of misbuying is particularly great if stakeholder is sold through non-regulated bodies such as the Citizens&#39 Advice Bureaux.

Judge says MSF would prefer technical experts, ideally advisers, to guide people through stakeholder decision trees but says cost is an issue.

Alliance for Finance secretary Digby Jacks also says pensions must be sold with advice but that the exact form of this advice may have to be “resolved in practice”. He calls on IFAs to accept lower margins in the stakeholder market.

The Alliance has misgivings about employer contributions and social exclusion as well as about advice. But Jacks insists his organisation supports stakeholder and that the way forward is through dialogue with the FSA.

Judge says: “We are wary of execution-only type business, especially if it is being distributed by a non-regulated body. People will put their trust in these organisations and it is open to abuse.”

Jacks says: “It is possible for stakeholder to be sold without advice but we maintain the importance of advice for long-term investments such as pensions. It is essential.”

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