Parallel schemes will be allowed under stakeholder, according to the most recent consultation paper ...
Parallel schemes will be allowed under stakeholder, according to the most recent consultation paper from the Inland Revenue and the Department of Social Security
The Government has proposed that stakeholder pensions, existing personal pensions and money purchase schemes will all fall under an integrated defined contribution pensions regime. Money purchase schemes will have the choice whether to opt into the regime or not
It has also stated that members can hold more than one DC scheme within this regime. However, it has initially ruled out allowing parallel membership between final salary occupational schemes and DC schemes. The AVC and Free Standing AVC facility will still apply to final salary schemes
The Government has asked for suggestions on ways in which defined benefit schemes could also contribute to a stakeholder pension
Product providers were initially concerned that the Government would not allow members of existing group personal pensions to also have a stakeholder pension
The latest consultation paper does allow for parallel schemes, but there is still a question of how it will be policed. There is no apparent limit on the number of pension schemes a member may have within the DC regime but the regulations would require that above £3,600, their contributions must not exceed their existing personal pension limits
Parallel schemes also change the implications of PIA Regulatory Update 64, which looks at how IFAs sell personal pensions today in the light of stakeholder pensions coming into existence in April 2001
Last month Investment Week wrote that if the Government did allow parallel schemes then some occupational pension members may want to switch their existing FSAVC to a stakeholder, which would have lower charges and an annual contribution level of £3,600
Paul Smith, head of pensions development at AXA Sun Life, said: "I would now expect the PIA to extend Update 64 in light of these proposals. A member in a money purchase occupational scheme can now also take out a stakeholder arrangement, which may be a more attractive vehicle then FSAVCs
"If stakeholder can be a replacement for FSAVCs then the transfer considerations are the same as for existing personal pensions and it therefore it becomes relevant to 64
"The same principles when advising on a personal pension should then be applied to a FSAVC
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