Occupational pensions may no longer be required to pay its members two-thirds of their final salary ...
Occupational pensions may no longer be required to pay its members two-thirds of their final salary when they retire, once the Pensions Green Paper is published.
Speaking at the SOFA Update Conference in Birmingham, Howard Flight MP welcomed Gordon Brown's decision to allow policyholders to keep claiming the tax-free allowance of a personal pension if they wish to.
However, Flight said sources inside the Inland Revenue opposed the maintenance of that tax-free lump sum when policyholders retire, as part of the Revenue's pensions tax simplification paper for the Treasury.
He also added there could yet be a "sting in the tail" of the Green Paper as the retrospective funding of company schemes may change and the requirement to pay two-thirds salary to members could be scrapped.
"I'm not saying Middle England is out of the woods yet. They will get rid of the 2/3 rule and they are trying to simplify the contribution rules for money purchase schemes. They may even try to implement lifetime limits, but doing so could present problems," said Flight.
In addition to his comments on the impending pensions reform proposals, Flight questioned some of the initial depolarisation plans to get rid of "better than best" rules on provider-owned IFA firms which require advisers to prove the provider's product is clearly better than any other.
"I don't know how the FSA could come up with rules which conflict with the interests of policyholders," continues Flight.
"There are intentions to introduce restraints of some kind, but if no more than
10% of the volume of products sold can be supplied by the [IFA's] shareholders, what providers will really still be interested in buying IFAs?"
Flight also added he believes few of the big-named providers will want to become multi-tie providers because marketing and selling the products of other firms might not be enough to make up a reduction in the sale of their own products.
"Lloyds [TSB] needs to justify the price they paid for Scottish Widows, as does HBOS for Clerical Medical, and other firms with insurance arms. But how many will make the move – it looks like a minority," says Flight.
‘Important to have an anchor’
Report to be written by TPR
Lack of innovation for solutions
Some 2,000 consumers affected