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Pensions shake-up proposals to be unveiled
Plans to
simplify greatly the range of pension products available in the UK and
break down the barriers between workplace pensions and those bought by
individuals are to be published by the government this week. The
recommendations from Alan Pickering, former chairman of the National
Association of Pension Funds, are due to be published on Thursday
following the report on barriers to saving by Ron Sandler. Both reports
will call for a range of simpler pension and saving products that can be
sold effectively "off the shelf" with minimal advice because the
product, rather than its sale, will be regulated. Fund managers
said recommendations expected by the Sandler report that investors would
be better off using index tracker funds could prove a mixed blessing.
Richard Saunders, chief executive of the Investment Management
Association, the industry's trade association, said most members already
offered both active and passive fund management products. "Both of
these have a place in a portfolio," Mr Saunders said. He believed
there were misconceptions about just how much more expensive actively
managed funds were compared with passive funds. "Many of the higher
costs attributed to active management are, in fact, commission fees paid
to advisers," he said. Mr Pickering
is to call for employers to be allowed again to insist employees join
their pension scheme - a right they lost in 1988 - but that employees
should also be allowed to hold another pension alongside an
employer-backed one. That approach
- known as concurrency - is allowed with stakeholder pensions, but only
for those earning up to ý30,000 a year, a limit the government put in
place because it believes full concurrency could cost ý400m a year in tax
relief rather than the ý150m that parallel holding of stakeholder
pensions could generate. Mr Pickering
will propose that employers should be given far more freedom to design the
type of pension they provide for employees, and what fringe and other
benefits it has - an attempt to bolster the remaining final salary
schemes. That, he believes, will reduce the burden of regulation - one factor that employers have blamed for their decision to close schemes or bar them to new members. To simplify pensions more generally, Mr Pickering also wants to cut the wide range of pension products to two or three basic models. There are tensions between the reports. Some of Mr Pickering's advisers fear the Sandler recommendations for changes to with-profits policies could damage a saving vehicle that allows individuals to smooth the ups and downs of the stock market without the need for detailed investment knowledge. FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Action on Aging distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
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