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&#39Stakeholder stunting growth in the market&#39

Stakeholder will hamper the competition needed to grow a healthy pension marketplace, according to research agency Cerulli Associates.

It says the 1 per cent stakeholder charge cap is the main factor which will constrict profitability and growth.

The report says the cap will restrict stakeholder to certain types of investment.

A further finding in the report, published this week, claims stakeholder pensions will hold less than £20bn in funds under management by 2006, which Cerulli says is dramatically lower than forecasts which have been made by the Government and life offices.

Cerulli&#39s report also forecasts that the stakeholder market will be dominated by a small number of big providers. It believes that the first entrants into themarket will be the most successful.

Consultant Thomas March says: “Because of the high quality of record-keeping and administration that stakeholder will require, plus the scale of business needed, the product will only lend itself to a few players. The 1 per cent cap will not allow a mix of investments in the pension investment portfolio.”

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