Personal finance: `Revolutionary' pension alert
The Treasury's new tax-free pension wrapper is a sensible move, but hardly new
Saturday 06 February 1999
Maybe I'm missing something here, but it doesn't seem like it to me.
What the Government seems to be proposing is that unit and investment trust companies, who have found it difficult to package products under a pension wrapper, will be able to do so more easily from now on.
A new tax-free wrapper, offering the same benefits as a traditional personal pension, will be applicable to occupational schemes, the proposed stakeholder pensions, even personal pensions. The quid pro quo for companies planning to use this wrapper is that their products must be cheap, with level charges and low or no entry and exit charges.
It is easy to foresee the effect of such changes. Life insurance companies have been kicked in the teeth. Their own products have been judged to be inflexible and far too expensive for investors. To that extent, what the Government has done is a sensible move. But it is debatable whether it really is as new as all that.
Unit and investment trust firms have always offered their products in pension form. However, independent advisers have tended not to recommend them, largely because of the low upfront commission they paid. Many companies have also offered "recurring single premium contributions", where you can pay regular monthly premiums - but without heavy charges. Again, most advisers "forget" to tell their clients about this option, for the same reason as before.
Will this change now that unit and investment trusts can be marketed more easily? To the extent that many advisers' clients are taking on board what this newspaper has argued for years, namely that charges are a critical aspect of any pension, it will have some effect, though not quickly.
The Treasury's liberalisation of its pensions wrappers is also positive: some will benefit from the wider investment choice. This, however, brings other problems. Is it sensible for savers to take out unit trust-style pensions investing in, for example, Latin America?
Proper advice is critical. Yet Ministers appear to be pinning their hopes on product "transparency" as a way of ensuring they are properly sold. Big mistake: I can see another pensions scandal looming here.
Another question mark hangs over the extent of this flexibility. This new vehicle is intended to enable people to move from employer to employer with it.
Assuming employers will allow you to do that. And that they will pay the same contribution into your pension vehicle as their own. There's no sign that they will be forced to.
While useful, these proposals don't constitute a revolution. We're still waiting for New Labour to deliver on that one and I, for one, am not holding my breath.
Life & Style blogs
Who is Teresa Fidalgo? Debunking the fake ghost story that's got Instagram spooked
The 10 Best juicers
Boxing Day sales: From Asos to Harrods, the best fashion deals
The 10 Best food processors
Health: When masturbation can be fatal: The practice of auto-erotic asphyxia is often concealed by a coroner's verdict. Monique Roffey looks at a lethal taboo
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Katie Hopkins speaks out on childhood obesity: 'Parents of fat children should be prosecuted for child cruelty'
- 1 Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
- 2 Margaret Thatcher 'expressed fears of Asian rising' at Anglo-Irish summit in 1984
- 3 Sussex couple die in suspected Christmas Day 'suicide pact'
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 The Unluckiest People of the Year 2014 (and one very unlucky giraffe)
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...
£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...
£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...