Although product providers have been quick to praise the Government's decision to reconsider the 1% ...
Although product providers have been quick to praise the Government's decision to reconsider the 1% cap commission for the stakeholder suite of products, the Consumer Association is urging the Government to keep its nerve in fighting for the maximum charge for the sake of investors.
Fidelity and Norwich Union, among a number of other providers, have come forward to commend the Government's U-turn on the 1% cap charge which was outlined in its consultation document on simplified products, Proposed product specifications for Sandler "stakeholder" products, that was released yesterday.
NU welcomes the Government's decision to open to discussion the 1% price cap issue and introduce an independent research commission, while Fidelity argues that the price cap would drive away competitors leaving consumers with a narrow choice of poor quality products and little room to pay for the cost of advice.
Fidelity's managing director Richard Wastcoat says, "1% is, by the Government's own admission, an arbitrary choice with no commercial analysis behind it."
However, Mick McAteer, senior policy advisor for the Consumer's Association says there are too many poor value products and providers, which leads to unnecessary costs for consumers.
In responding to the providers' comments McAteer says: "We believe this is nothing more than a disingenuous attempt to raise revenue for a bloated, uncompetitive industry."
But the CA is not ruling out the need for advice. Instead it warns that removing regulatory protection could lead to mis-selling issues, especially with vulnerable consumers who need access to advice.
In the light of impending depolarisation of the financial services industry the CA expects more confusion for investors and proposes the creation of a new national financial advice network to complement private sector channels to ensure stakeholder products are sold safely and cost effectively.
Fidelity says that one of the biggest problems with the Government's proposals on encouraging lower income earners to put money aside is the emphasis on a prescription for the supply side, without identifying where demand will come from.
Wastcoat says there is no mention in the consultation document of tax incentives or indications of how the Government will communicate the need to buy these products to the target market.
Fidelity has also been critical of the Government's proposal to place a 60% maximum level of equity exposure. The asset manager says that the 60% maximum level would be too low for a young saver and yet too high for a person close to retiring.
Fidelity is pushing for the 'lifestyle' model - of moving assets from equities to fixed income as the investor nears retirement - that was suggested for the stakeholder pension product to be applied to the other products in the suite.
Fidelity is also encouraging the Government to review the taxation anomalies between mutual funds and insurance products, following the proposal in the consultation document to allow the unitised stakeholder product to take either legal form.
The government is welcoming responses to the consultation document by 2 May 2003.
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