“Some people say football is a matter of life or death. That is ridiculous. It is much more important than that.” Famously spoken in 1969 by Bill Shankly, the legendary Liverpool football manager, the same phrase might be equally appropriate in the context of stakeholder pensions.
Few commentators (apologies for the early footballing pun but it sets the tone for this article) doubt that stakeholder will have a far-reaching effect on the pension sector and, ultimately, on the whole financial services industry.
After further consideration, it appears this seemingly tenuous link between football and stakeholder does, indeed, go much deeper. Even though the stakeholder season has only just kicked off, we are seeing product providers either joining the “Premier League” or falling into the “Nationwide Conference”.
As the gap widens between the bigger and smaller “clubs”, it is likely to become increasingly difficult to move up and stay up. If we assume the first-quarter pre-stakeholder market share league table is a fair barometer for how the stakeholder cake will ultimately be carved, we can already see the big clubs such as Norwich Union and Standard Life moving up the table and building up a lead over rivals.
There is also evidence of some big names starting to drift away and they will need to act fast to avoid relegation.
Just how far can we continue this footballing analogy and can it really be used as a predictor for the way that the stakeholder pension market might evolve?
First, consider where the balance of power has moved to. Until recently, many pension providers and advisers were able to dictate the style of the products they sold and customers often ended up with weird and wonderful products. In the footballing world, too, the clubs held all the power, the players were often flamboyant and the fans were poorly treated.
Nowadays, clubs are investing millions of pounds in new stadiums and have realised that treating the fans better is key to their continued success. Without fans, the game is nothing and, without customers, the pension companies are also nothing.
Perhaps the only difference is that players' wages clearly do not operate in a 1 per cent world. Let us hope the increasing role of players' agents in football is also an indicator of the future for IFAs within the pension industry.
Next, take a look at the new rules for stakeholder, introduced on April 6. These say that stakeholder can be transferred between providers free of any exit charges. This is something the Bosman Ruling introduced into football some years ago. A new code has also been introduced into football for buying and selling players although, not surprisingly, this has yet to include any sort of decision tree.
This football season also sees the launch of a rule designed to stop time-wasting. If a player is guilty, the referee blows his whistle and can award a penalty. How close is this to the new pension legislation on employer contribution remittance, requiring an employee to whistleblow to the regulator, which has the right to impose a fine on the offender?
Strangely, an analogy can even be found with reference to the new markets opened up as a result of the new April 6 legislation. Fifa rules introduced this season extend full recognition to women playing football and also allow anyone of any age to play in official tournaments. Perhaps the DSS had this at the back of its mind when it was thinking about allowing non-earning spouses and children to contribute to a pension for the first time.
Back in 1991, we saw the first example in English football of ground-sharing when Wimbledon and Crystal Palace moved to share Selhurst Park. It is taken for granted that the current wave of consolidation within our industry will similarly continue, with further mergers, acquisitions and examples of gap-filling tie-ups likely as product providers and distributors battle it out to survive in the 1 per cent world.
There must be many a hen-pecked husband out there who wishes wholeheartedly that the Government would introduce some sort of law making it compulsory for all men to watch football and that any man not obeying this by October 8 would be subject to some sort of fine.
The bizarre analogy continues. Amazingly enough (check Fifa's website if you do not believe me), there are new rules this season for the treatment of injured players. It is a pity similar rules did not come in a year sooner or perhaps more could have been done to bail out those Equitable Life policyholders tied into policies with seemingly little prospect of a high level of return.
Fifa has also recently rejected the idea of having two referees per match – maybe the DSS should have been at the same discussion table before penning the Governance requirements for stakeholder.
Now this uncanny link between football and stakeholder has been proven beyond all reasonable doubt, perhaps we can use football to predict what might happen in the future to the stakeholder market.
Numerous clubs have lost out financially when players have broken contracts midway through their term and left to go to another club. Those clubs would surely agree with the need to tie in players to their contracts and for the player to show some sort of loyalty. Stakeholder is no different. Critical to success is for providers to hang on to their policyholders until their funds have grown to such a level that 1 per cent suddenly starts to look healthy.
Trying to tie in a policyholder for life is highly desirable and well-designed products, superior investment performance and good service are all important in achieving this aim. Surely, providers everywhere will hope their policyholders stick with them, like those die-hard fans of some of the lower division clubs who continue to support their teams passionately even when they do not do so well.
One thing for sure is that it will be important for stakeholder providers and distributors to adopt the right strategy to win the game. Should they attack and go all out for a win early in the game by spending heavily to try and acquire high levels of business? Or should they instead adopt a more defensive position and run the risk of missing the team bus?
A commonly held view in the industry is that things will not stop at stakeholder. The 1 per cent world will affect everything. Similarly, we have seen how cricketing crowds now behave more like football ones and snooker players now have big-name sponsors emblazoned on their waistcoats. Will the stakeholder effect ripple over into other financial products just like football has impacted on other sports?
Who will survive in this mad stakeholder world? Looking to football for a clue, clearly, those with the biggest brand and financial muscle could do well.
CIS might well be hoping they pick up loads of business from the Southeast purely because of their locality to Manchester.
I also have no doubt that, just as our own domestic footballers can benefit from soirées on to the international arena, we too can probably learn from the experiences of overseas pension markets such as the US and Australia, while having to watch out for too many foreign entrants spoiling our own game.
I hope this light-hearted comparison between stakeholder and the national sport has brought a smile to at least a few readers who stuck with this right to the end.
True fans never leave before the end of 90 minutes, so I will end this article with one final observation. As any fan of Newcastle United or Blackburn Rovers in recent times will tell you, success does not always follow if you spend tens of millions of pounds trying to buy it.
The likely winners among those who choose to play stakeholder will be those who can adapt to the challenges that new markets bring about, operate on a sound financial basis and look after all their supporters.
They think it's all over
it is now.