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CA says 2% cap would turn public away from pensions

Doubling the stakeholder charge cap to 2 per cent would exacerbate the pension crisis as people would turn to savings accounts rather than stakeholder pensions, according to research from the Consumers&#39 Association.

The CA&#39s research – published a month before the Treasury announces its decision on whether it will vary the price cap – shows that 72 per cent of consumers would choose to invest in a savings account rather than a stakeholder pension with a 2 per cent charge.

Eighty-three per cent of respondents said an increase to 2 per cent would make a “big difference” to whether they took out a stakeholder and 79 per cent said the same if the cap was raised to 1.5 per cent.

But life offices say the Government&#39s three-year experiment with selling cut-price pensions has failed, with sales of individual pensions almost grinding to a halt.

Some life offices argue that it is the shape of the charge that is at fault and are calling for an initial charge and ann-ual management charge model instead of a flat rate.

CA principal policy adviser Mick McAteer says: “The bottom line is that the Government&#39s pension policy is in ruins but reversing the price cap would be misguided because it would price more people out of the market, reduce incentives to invest in a pension and risk massive misselling.”

Norwich Union head of pensions development Iain Oliver says: “What the Consumers&#39 Association is trying to say is that people will buy pensions because they are cheap. This was the view of the Government in 2001 before a three-year experiment that shows the opposite is true.”

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