I have just read Andy Cherkas' article headlined, The trouble with stakeholder (Money Marketing last week).
He identifies two things that suitability problems centre on:
60 per cent maximum equity content.
Lifestyling of pension funds.
If these are truly problems, can I suggest a simple way of avoiding them – use providers and funds that do not have these restrictions.
May I further suggest a fundamental reason why stakeholder contracts may not be suitable for the lower to middle-income earners on which his article focuses? That is, the potential of losing state benefits paid in retirement if someone saves small amounts into a pension.
There is a common response from lower-paid individuals when offered membership in an employer's scheme (even where the employer contributes on a matched basis) that there is no point joining as the eventual income will reduce the benefits provided by the state.
Forget educating the public about the simplicity, flexibility and cheapness of stakeholder pensions. The Government (and I am not just referring to the current “New” Labour) needs to demonstrate to everyone that they will truly benefit if they choose to save some of their hard-earned (and taxed) income for their later years rather than being penalised (either taxed or suffering reduction in benefits). Otherwise live for today will remain the slogan for a few more generations.
I appreciate that the educated among us want to retain control, as we feel that the state benefits are not to be relied upon. For example, I am contracted out, even though all the tables show that I should not be but I am not allowed to advise others accordingly as my decision is based upon my personal scepticism and goes against all of the “known” facts.
Unfortunately, there aren't enough sceptics out there – or are there?
GC Stevens Financial Services,