I note with some amazement that Legal & General propose to reimburse stakeholder policyholders with any charges arising in excess of the permitted 1 per cent a year cap – not least because this will be conditional upon the third party funds which may give rise to this outperforming lower charging funds.
This raises a number of questions. Over what periods will levels of performance be compared? Against which lower charging funds will these comparisons be drawn? The best? The worst? An average of all the lower charging funds?
What will happen if the higher charging funds don't outperform their lower charging counterparts? The charging cap will still have been breached but the investor will be out of pocket with no recompense. Surely that will not be acceptable to the powers that be?
It may take just one low charging fund to achieve, perhaps by no more than fluke, outstanding performance over a given monitoring period to upset the apple cart and cost the life office in question even more money than it will be losing by having marketed its stakeholder product in the first place. How can a gamble of that nature possibly add up to sound business management?
Given that L&G's administration is already legendary for its awfulness, how will the cost of meeting warranties of this type accomplish anything but making the situation worse than it already is?
As for the issue of last minute stakeholder regulations having been announced without industry consultation, the obvious question arising is whether or not prior consultation would have made the slightest difference.
As is well known, the principal driving force behind all things stakeholder is political, taking virtually no account of either commercial or practical considerations. If ever there was a first class mess in the making at the hands of politicians, stakeholder must surely be the number one candidate.
WDS Independent Financial Advisers, Bristols