For immediate release Wednesday 3 February 1999

AUTIF WELCOMES GOVERNMENT PROPOSALS ON FLEXIBLE PENSIONS INVESTMENT

The Association of Unit Trusts and Investment Funds has long argued that a simple PEP-like wrapper was the ideal solution for improved pension provision in the UK. The Association warmly welcomes the Government’s initiative and will be urging the early introduction of the necessary secondary legislation.

Philip Warland, Director General of the Association commented:

"More than half of the population is unable to access an occupational pension scheme. They need a low cost, flexible and portable pension pot into which they can put money either regularly or on an ad hoc basis. They need to be able to stop and start contributions – and without penalty. PEPs have always worked like this and so can these new pensions. They will be an important part of the savings armoury for middle and lower income households."

He continued:

"The regulatory regime for such products is already well-tested and so will be able to meet most stakeholder criteria with little amendment. We look forward to working with the Government to refine the stakeholder requirements for this new vehicle. It will also provide a new way of providing defined contribution occupational pension schemes along the lines of the highly successful and popular 401K schemes in the US."

For further comment please contact:

Philip Warland Director General, AUTIF, 0171 831 0898
Anne McMeehan Director of Communications, AUTIF, 0171 831 0898
Clare Arber PR Manager, AUTIF, 0171 831 0898

Notes for Editors:

1. "Stakeholder" pensions are defined by the DSS as pensions which will be allowed to receive an NI rebate for those earning between £9,000 and £18,000. They must meet the following criteria:

A simple charging structure, preferably a flat rate percentage: this will not cause problems for providers of authorised unit trusts or oeics.

Limit on permitted level of charges: no difficulty in principle.Experience of developing CAT standards for ISAs will help this process.

Specified minimum contributions: this is already standard practice for unit trusts and oeics and there is no problem in principle with fixing a low minimum.

Annual limit: the proposed limit of £3,600 is comparatively generous and realistic for the target investors.

Stop and start contributions without penalty: already standard practice for unit trusts and oeics.

Transfers in and out without additional charge: should not be a problem. Already available in PEPs, although some charge for transfer.

Annual information about values etc: unit trusts and oeics are priced on a daily basis already so there will be no problem about supplying regular information to investors. PEPs already required to give twice-yearly statements and valuations.

2. In the US 27,000 employers run 401K pension plans with 6.5 million employee participants and $250bn invested.