View more on these topics

Demand and Design are the key areas

Stakeholder pension, IPA, Isa and Cat standard. Which is the odd one out?

The answer, of course, is the Isa. Why? Because it has been a huge success while the other three have failed – failed to reach their target market and failed as a commercially viable proposition for product providers.

The reason for this lies in the other key difference that sets the three laggards apart from the Isa. The stakeholder, the IPA and the Cat are all products or specifications designed in Whitehall. With the Isa, the Government listened to the industry&#39s views during the consultation process and dropped many of the original ideas.

In other words, it largely left product design and pricing alone, limiting its involvement to setting the annual limit and continuing the tax wrapper that was necessary to provide a smooth transition from Peps to Isas.

There are two lessons in this for the Treasury as it prepares its consultation paper on Sandler&#39s suite of stakeholder products. First, product design needs to be right. Second, even good product design is useless if there is no demand.

First, product design. In the case of the mutual fund, the Whitehall mandarins are homing in on risk as the key feature that will distinguish Sandler&#39s products from the rest.

But the idea that the design team can limit or control the risk inherent in equity investment sufficient to make the products somehow safer or more appropriate to the target market opens up a can of worms. It is far better to educate people about risk and how to manage it than pretend that it can be controlled in this way.

On price, you would expect me to say that we disagree with the 1 per cent cap. But I know that for the time being I am whistling in the wind.

Although the message appears to be getting through that there is no commercial or intellectual case for the 1 per cent limit, I fear that the Government has become too politically committed to it to be able to contemplate a climbdown.

Ruth Kelly accepts that “different products have different economics” but remains keen to expand still further the range of products that must conform to the 1 per cent straitjacket.

The second lesson concerns the market. Focusing on the product is only half the story – the supply side of the equation. But the Government needs to look at the market in the round and, in particular, think long and hard about ways of stimulating the demand for stakeholder products.

It fondly believes that there is huge pent-up demand just waiting for a Sandler-marked product to come along. But I have seen no convincing evidence of this. Without it, many product providers will politely decline to get involved and Sandler will be left like a host who threw a party to which no one turned up.

One thing we are all agreed on is that people need to save more. But the idea that Whitehall&#39s finest can design a suite of simple non-toxic products that will change the saving patterns of the British people is far-fetched.

We need a broader debate about distribution, education, the need for advice, real incentives to save and the role of the employer. We need at least to address the vexed issue of compulsion.

This Government constantly tells us it has not shirked from making tough choices. The issues thrown up by Sandler offer an excellent opportunity for them to prove it.


Euro rule gets my vote over the FSA

So, execution-only sales could disappear and Hargreaves Lansdown is spitting its dummy out in righteous indignation (Money Marketing, November 21).The FSA says it will argue against this as “it does not take home market models into account”. The pre-CP121 polarised UK market was initially attacked by the FSA on the basis that it was different […]

16 million face pension poverty

The proportion of British workers facing a difficult retirement is rising, with the over 60 age group facing the biggest slide into pensioner poverty, says JP Morgan Fleming.According to JP Morgan Fleming&#39s pension map of Britain report, a staggering 16 million workers representing 54 per cent of the UK workforce will retire on incomes of […]

Big rise in firms shutting FS schemes

The number of companies cutting costs by closing final-salary schemes to new members nearly doubled in the last year, according to the National Association of Pension Funds&#39 annual report.This year, out of the 970 firms surveyed, 84 companies closed their final-salary schemes compared with only 46 companies in 2001.The survey identifies that such a move […]

Out of context

•”Those big balls hurt my fingers.” – IFA Promotion marketing manager Karen Barrett.•”I am orgasmic with anticipation at how I am going to spend my £35.” – DBS member looks forward to his Misys Christmas bonus.•”I thought we could all start with a chorus of Always Look on the Bright Side of Life.” – Aifa […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm