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A consumer&#39s view – Lorna Bourke

The vexed question of who will advise individuals on whether or not to

invest in a stakeholder shows no sign of going away.

The Government&#39s contention that employees can decide for themselves looks

ever more ludicrous.

The findings of recent surveys are not encouraging either. Bacon &

Woodrow, for example, who might be exp-ected to have some of the bigger

employers as clients – reports that of 210 companies surveyed, only 12 per

cent will be offering employer contributions of 3-10 per cent.

Presumably, the other 88 per cent of companies are simply complying with

the legal requirement to offer a stakeholder to employees.

If the employer is not prepared to contribute to the stakeholder pension

scheme, he is hardly likely to be prepared to pay a pension consultant to

advise his employees.

Indeed, if the employer does not intend to make any contribution to the

scheme, the advice to individual employees must be not to bother to join as

they will have more freedom of choice by making their own arrangements.

More worrying for the Government must be the revelation from Co-operative Insurance Services that 42 per cent of small companies surveyed will not be offer

ing stakeholder pensions after the October deadline, even though some will

be breaking the law.

But any hope that employers will pick up the tab for offering advice on

stakeholders to employees must be dashed by Legal & General&#39s finding that

89 per cent of small and medium-sized companies do not offer any financial

services to employees – other than life cover and medical fees insurance.

The notion that individuals will be able to decide for themselves whether

or not to invest in a stakeholder – and if so, which one to choose – looks

increasingly ridiculous by the day.

With some 6,000 unit trusts, investment trusts and unitised pension funds

to choose from, this is clearly out of the question.

Even the decision on whether or not to invest in a stakeholder is all but

impossible to reach without exp-ert guidance.

A quick look at the FSA&#39s decision tree does deal to some extent with the

vexed question of whether those on average earnings or below would simply

find themselves providing stakeholder ben-efits no better than the minimum

income guarantee.

But none of the websites visited pointed out that an Isa is a better bet

for the average person who cannot afford to save more than £7,000 a

year – unless their employer is making a substantial contribution to the

pension scheme.

The ability to access Isa money if necessary, while seen as a minus point

by a Government keen to encourage saving for retirement, is a very definite

plus point for a 25-year-old saving for the deposit on their first home.

Which do people need more – a home or a pension?

Moreover, Isa savings can be spent as and when needed in retirement until

the individual eventually qualifies for the minimum income guarantee.

When stakeholder pensions come up for review, it will become all too

apparent that they have simply provided a profitable tax avoidance device

for the wealthy and have done little or nothing to provide pensions for

lower income families.

The only way to make stakeholder work as the Gov-ernment intends is to

make employers&#39 and/or employees&#39 contributions compulsory. That way the

question of advice becomes more or less irrelevant for the vast majority of


But there is a fundamental problem which neither Blair nor Brown seems to

want to address. A poll by the Post Office reveals what we all know – 35

per cent of would-be stakeholder investors do not save for retirement

because of a lack of spare cash.

This fact ought to shake the consciences of Messrs Blair and Brown – but

it will not. As long as the Govern-ment continues to tax individuals on

incomes as low as £10,000 a year, the official poverty level, it is

hardly surprising that so many people have nothing to save.

It is little short of scandalous that some 13 million low-income

individuals and families – half the taxpaying public – are on incomes so

low that the total tax take from them amounts to just £12bn out of a

total income tax take expected to top £140bn during the current tax


Government taxation policy is a major contributor to poverty. No amount of

tinkering with “tax credits” will alter the fact that these people should

not be paying tax at all.


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