The updated stakeholder plan is compatible with the Governments new maximum stakeholder charge of 1.5 per cent, which came into effect on April 6.
The fund range available on this plan is restricted to 20 Friends Provident funds, whereas the individual personal pension offers a wider range that includes multi-manager funds and externally managed funds from companies such as Fidelity, Gartmore and New Star.
Both plans offer a choice of three lifestyle investment options cautious, balanced and speculative. These have a 10-year, five-year and three-year strategy respectively and work by gradually switching money away from the clients chosen investment funds into the cash fund or annuity protector fund as retirement approaches.
The plans also have options allowing a client contract out, transfer their existing pension fund to Friends Provident, save into a pension on behalf of a child and invest their share of a pension after a divorce settlement.
Friends Provident will make a basic annual management charge of 1.5 per cnet in the first 10 years, which reduces to a maximim of 1 per cent thereafter. Individual pension policyholders who choose multi-manager and external funds will pay additional charges. However, providing the total value of the clients pension fund is at least 20,000, the annual management charge will be reduced by between 0.1 per cent and 0.25 per cent. Commission sacrifice will also reduce the annual management charge.
A useful feature of the range is the flexible commission options available to IFAs. This makes it easier for advisers to tailor their remuneration to reflect the work they have put in, which was difficult to do in the one per cent world. However, while advisers may feel the individual personal pension has adequate fund links, a lack of even a limited number of external fund links may make the stakeholder plan unattractive.