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Widows makes a plea for equal stakeholder rebate

Scottish Widows has called on the Government to make contracting-out rules

the same for all stakeholder pensions.

The company broadly welcomes the draft Department of Social Security rules

for stakeholder.

But Widows says it is illogical that the contract ing-out rebates for

occupational stakeholder will be much lower than for personal stakeholder.

The company wants the imbalance brought into line with the unified

policies on other pension products.

However, the DSS is not planning to undertake a review of the rebate

structure, including rebates for stakeholder, until 2002.

The Government wants contracting-out procedures for stakeholder to mirror

the existing two-tier system which is more generous for personal pensions.

The rebates for occupational money-purchase schemes were reduced signifi-

cantly last year.

Before the change, many final-salary schemes contracted out on a

money-purchase basis to secure bumper reb ates for members.

But after the rule change, Widows says smaller money-purchase schemes were

disadvantaged compared with personal pensions, making it rarely advisable

for smaller schemes to have members contracted out.

Pensions strategy manager Ian Naismith says: “The proposals for

contracting-out under stakeholder needlessly perpetuate the imbalance in

the current arrangements.

“The Government has agreed to a unified tax regime for money-purchase

pensions and it should extend this to stakeholder. All stakeholder schemes

should receive the full rebate from the Government after the end of the tax

year and the amounts should be independent of the scheme structure.”

A DSS spokesman says: “We will take into account what Scottish Widows thinks, along with other responses.”

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