Newspaper article The Evening Standard (London, England)

Suitability Problem for the FSA with Sandler; CITY COMMENT

Newspaper article The Evening Standard (London, England)

Suitability Problem for the FSA with Sandler; CITY COMMENT

Article excerpt


Suitability problem for the FSA with Sandler

RON Sandler's report yesterday on the retail savings market was pretty tame compared with the one Alan Pickering will deliver tomorrow on pensions. He suggests two hugely controversial moves to make pensions cheaper for employers. First, the final pension should no longer continue in reduced form for the spouse after the pensioner dies. Second, the obligation to increase pensions in line with inflation up to an annual ceiling of 5% should be abolished.

Whether these moves would cut costs by enough to make companies keep final-salary schemes they might otherwise close is the real test - and we cannot know the answer.

Meanwhile, what happens to Sandler? It was virtually assumed in today's newspaper commentaries that because he had made a series of proposals to reform the savings market they would automatically happen. That is not necessarily so, however, for the ball now passes to the Financial Services Authority.

Sandler's brief was to find ways to encourage saving, but that is no part of the FSA mandate. Its job is investor protection and education, so it is under no obligation to push through, let alone fast-track, the proposals. Instead it will consider them, draw up changes it might think desirable, put these out for consultation, take the comments of interested parties and then, if it considers the benefits outweigh the costs it may open the door to change.

There may also be some interesting debates within the regulatory body. One of the more enlightening pieces of literature published recently was the FSA's guidance on stakeholder pensions (issued to employers who had an obligation to make these available) - which said in its usual coded way that they were not suitable for poor people.

Best advice in the FSA's world for such people is that they should pay off their credit card bills and do all sorts of other bits of good housekeeping to manage their week-toweek cash. …

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