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Pension scheme selection: there's a wide range of defined-contribution products, providers and advisers on the market. David Barker offers his guide to finding the right ones for your firm.

Document Cited in Related
AuthorBarker, David
PositionTECHNICAL MATTERS

The stakeholder pension, introduced in the UK in 2001, has been called a flop rather than a flagship of the Labour government. Part of the blame has been attributed to its cap on charges, but the biggest success of the stakeholder legislation is that charges for all types of new defined-contribution (DC) pension scheme have fallen to about a third of what they were five years ago.

But charges still vary and at some point cheap must surely mean nasty. Several different types of group DC pension schemes are available, but which are worth paying more for and how do you choose the best provider for your organisation's needs?

Guidance is available from several sources, including whole-of-market advisers, limited-range advisers and those tied to a single provider. As their name suggests, whole-of-market advisers are required to analyse all pension providers before determining the most suitable one for your organisation. Such an analysis is appropriate for group DC pensions, because the market has changed a lot and is still evolving.

Advisers can be paid for their services by commission, fees or a combination of both. Most will usually operate on either basis, although a number of providers will not pay commission. Only those advisers who work on a whole-of-market basis in all areas of their business and give the option of fee-based remuneration can call themselves independent financial advisers.

With certain types of investment, the cost of a whole-of-market approach is unnecessary, but it's the only real solution when it comes to group DC products. In the past two years my firm...

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