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's 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's 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's 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
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
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' and/or employees' 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.