THE investment fund industry this week welcomed what it
sees as an overdue pensions
revolution.
The Government's new investment mechanism for
pensions, unnamed and there-
fore still dubbed the Lisa
(lifelong individual savings account), is being played down by some traditional providers as ''no big deal''.
Lisa will enable savings paid into a unit or investment trust or other pooled fund to be labelled as a ''pension account'' with the attendant tax privileges. Critics argue that most of the flexibility, clarity and portability Lisa offers is already available. But it tends not to be available yet in exactly the market which the Government is targeting - people on modest incomes and those with variable work patterns.
The Lisa effectively puts pensions firmly into the benchmarked, low-charging, savings environment and can only hasten the long overdue move towards clean pensions.
This week the industry's new super-regulator, the Financial Services Authority added its support to Money World's Campaign for Clean Pensions launched a month ago. The FSA said: ''The regulators require investment firms to make clear disclosure of their charges but do not regulate the charges themselves. Investors should shop around to make an informed decision and read material thoroughly . . . The Herald's work, highlighting information about charges and how they
can affect your investments, is very welcome.''
Philip Warland, the director-general of the Association of Unit Trusts and Investment Funds, said of Lisa: ''We have been waiting for this for some time. In two or three years I don't think you will be able to sell any product with a high front-end charge.''
The Government sees the new mechanism, which dispenses with trustee protection for a
pension fund, as ensuring the
success of its new stakeholder pension regime. Targeted at
middle-earners, this regime will set minimum criteria such as charges and is due in April 2001. But Lisa is also intended to be a way of providing a simple, transparent and portable pension account for occupational schemes or personal pensions.
Warland said: ''The better insurance companies including a number in Scotland have seen this coming a long way off and have built up their unit trust arms, they will be in pole position and will have no trouble with it. The people who are going to be in trouble are companies wedded to with-profits policies and products, and who haven't seen that the high front-end loaded product is
effectively going to be competed out of the market.''
Daniel Godfrey, the director-general of the Association of Investment Trust Companies, said: ''The way the Government has chosen to do it clearly exposes the fuss we have had over the past year (over stakeholder pensions) as the squawking of vested interests. The idea that we don't need trustees is superb - investment trusts already have their assets held by a custodian which
provides the same arms-length effect. The Maxwell pensioners did not find trustees to be any guarantee of good governance
or security.''
He added: ''Good independent advice is worth paying for and we don't see why this product would exclude the possibility of advisers being paid for advice.''
Jenny Scott at Marks & Spencer Financial Services said: ''We are very pleased that the Government is coming out strongly linking stakeholder
pensions with Isas.''
Tony Wood at Virgin Direct commented: ''The crucial thing next is to create more flexibility about how and when you can use your pension money.''
Standard Life and CGU, two
of the lower-cost traditional providers highlighted in our campaign, both warned that while simplicity was welcome, another layer of choice would create even more need for good advice to the consumer, which would have to be included in pricing.
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