Stakeholder pensions with trustee boards will have lower contracting out NI rebates than other schem...
Stakeholder pensions with trustee boards will have lower contracting out NI rebates than other schemes in the stakeholder regime.
Those schemes which are set up under an alternative governance structure through an FSA authorised stakeholder scheme manager, such as a life or unit trust company, will receive higher rebates.
Last week's DSS announcement on stakeholder stated that for 2001/02, the existing rebates for contracted out money purchase schemes and appropriate personal pensions will apply to occupational stakeholder and personal pension stakeholder respectively. What will happen in terms of rebate levels after that has been left open.
Since it is a requirement under any occupational scheme to have a trustee board and personal pensions do not have governance issues, Scottish Equitable is assuming the same will be the case under stakeholder.
Steven Cameron, pensions development manager at Scottish Equitable, said: "Trustee boards for stakeholder have been thought too impractical as the trustees themselves would be held financially liable. The lower rebate further reduces the likelihood that trustee arrangements will be popular even though Opra and some unions have stated that trustees are the best route."
Paul Smith, head of pensions development at AXA Sun Life, said: "I can't believe that's what they really mean. You need a level playing field and governance should not make any difference to the rebate. It defies all logic. Everyone will opt for the scheme manager arrangement, when the trustee arrangement was the government's preference." According to the DSS's paper the rebate levels are to be set at the same level as the current regimes, which are higher for personal pensions than money purchase schemes.
Cameron said: "If the Government had included more generous rebates as incentives to contracting out it would be more understandable than keeping the rebate levels the same. At the moment personal pension rebates are so finely tuned that it is a difficult decision to make on the advantages of contracting out. It is a very subjective decision based on personal assessments of many different factors such as a person's optimism of investment returns. To make this type of decision using a decision tree is impossible, it is too finely balanced."
Pensions minister Jeff Rooker, in an interview with Investment Week, said there was still ongoing consultation on the issue of rebates. Rooker also confirmed that the DSS is lobbying the Revenue to allow parallel membership in final salary schemes and defined contribution schemes. Parallel membership in stakeholder DC schemes was agreed upon in the last consultation brief but defined benefits schemes were left outside this allowance. Rooker said: "We have made our views known. It is a Treasury led decision and we are waiting on them. We will know as soon as possible."
Alasdair Buchanan, head of communications at Scottish Life, said: "It has seemed lately that the DSS is comfortable with parallel membership and that they are now looking at how to make it work rather than should we."
For more on stakeholder and Investment Week's interview with Jeff Rooker see page 13.
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