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Anyone who has sat through Steve Bee&#39s marvellously witty but erudite

conversations about pensions cannot fail to have spotted that this is an

area where no idea quite works out as originally intended.

They may start with every intention of opening up the market in a new and

exciting way to reach the unpensioned and offer new opportunities for

easier financial planning but somehow the end-result never quite fitsthe


Is stakeholder a new breakthrough or more of the same? The idea is not

bad. Individuals, even on modest incomes, should be able to save with some

flexibility and security for their old age in an account which bears their

name and where they can have confidence about the charges deducted from

their fund. But somehow this objective has become obscured.

There has been perhaps over-concentration ona charging cap which leaves no

room for the advice which many undoubtedly will want to have if they areto

take out a stakeholder pension. Many willbe at the mercy of decision trees

which theymay find difficult – and certainly will find boring -to complete.

Then there are mixed messages. Telling individuals that they should save

for their old age is fine. Expectations of what individuals want to do in

old age are rising and, if those expectations are tobe met, then planning

throughout a working life becomes essential.

But the message becomes confused when it is set against the creation of

the minimum income guarantee. I am not questioning the social value of the

Mig but it clearly adds a complication. Is a stakeholder pensiona suitable

investment or a means of scrimping and saving to deprive oneself of a

benefit already guaranteedby the state? Is there any way out of this


I suggest that there are two potential “get out ofjail free” cards.

First, the Government must be hoping for some enthusiasm from employers

about the whole stakeholder concept.

If employers can be prevailed upon not just to offer stakeholder but to

offer it perhaps with an advice element paid for by the employer, than a

better environment for the success of stakeholder can be created.The same

action by a trade union would have the same result. But I suggest to both

that they would be well advised to keep well out of the advice or

quasi-advice game. If they appear to be pushing for the stakeholder concept

to individuals, then they had better get proper qualified support or they

will be doing themselves and their members/employees a disservice.

The second issue concerns what an individual cando with the stakeholder

pot when he or she comesto retirement.

At present, the idea is for an element of cash-free lump sum and an

annuity. The annuity could well be at a level which is of no use to the

investor but simply excludes state benefits.

This may be good enough for the socialsecurity budget but the prospect is

scarcely going to encourage investment in this new concept.

What is needed is far more flexibility in how the money is taken. If a

total stakeholder pot is below a prescribed level, then why should the

investor not take the entire pot, rather as though it had been saved in an

Isa and not bother with setting up a paltry annuity? The value of the

saving would not be undermined, and the confidence with which an individual

would feel able to go into a stakeholder contract – or be advised to go

into one – would be enhanced.

There does need to be some imagination from the authorities if their

latest good idea is not to be drowned in its own contradiction.


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