It is hard to believe that the stakeholder pension is already more than a year old.
I remember thinking last year that, by some coincidence, Post-It notes were also launched on to the market on April 6, 1980. They too are simple, cheap and innovative but if you do not push them hard enough then there is a danger that they might become unstuck.
Our first-year analysis of stakeholder is that it has been a very positive start, with the product appealing to a wide range of people.
However, while stakeholder has definitely enabled more people to save, there remains a long way to go.
We believe that one of the key objectives of stakeholder pensions was to increase pensions saving among those on average earnings.
In this respect, stakeholder has only been partly successful and considerably more needs to be done.
We are talking with the Government about the ways in which we believe stakeholder can be improved and be made more easily accessible to everyone.
Building awareness of stakeholder pensions is one thing but the message needs to get across that more people must take action.
The major issue in terms of current and future retirement income is the relatively small size of the pension funds being built up prior to retirement.
In general, these are totally inadequate to provide for a reasonable level of income throughout retirement. Unfortunately, the consumer often does not appreciate this until it is too late. Everyone, including more below-average earners, need to be encouraged to start saving into a pension at an early stage to give them a chance to build up a decent sized fund.
There are a lot of belowaverage earners who otherwise would save a modest amount who have not been kickstarted into doing so because the incentives are simply not strong enough. This needs to be tackled.
The idea that lower charges on their own will convince people to save for retirement is too simplistic. Price is not the key determinant in making people decide if they are going to save or not.
For example, the uncertainty caused by state benefits (for example, the minimum income guarantee) is a contributing factor in the low take-up among lower earners.
The reality is that many of those investing in stakeholders during its first year would have invested in more conventional pension products in any case had stakeholder not existed.
Our view is that a totally new incentive for below-average earners to change their savings patterns is needed such as a preferential rate of tax relief, which is targeted, short-term and capped.
Hand in hand with greater incentives, there needs to be reform and simplification of the current pension framework generally so that it is simpler to administer and easier to understand.
The Government and the industry also needs to take a hard look at how best we can encourage more employers to contribute to company schemes, as our view is that the future success of stakeholder will depend to a large extent on successful workplace take-up. The 1 per cent world is not a comfortable existence for many insurers and, looking forward, it will be interesting to see whether all the current major players in stakeholder are still in the game in a few years' time. Our strategy has always been about achieving profitable growth in the stakeholder market. It was, therefore, inevitable that commission levels would come under pressure once the product had been allowed the chance to get off to the best possible start.
However, I believe IFAs are pleased that we continue to pay initial commission and that we continue to support a range of commission options. In fact, stakeholder will continue to be a key market for us.
We have invested heavily in advertising stakeholder, including major TV campaigns to take the message directly into people's living rooms, and we expect to see it representing an increasing proportion of our business going forward.
Peter Hales is sales and marketing director at Norwich Union
IFAs involved in Sipps and retirement options can get to grips with the latest developments in the sector at a conference in London in June.
The conference will be an update on the latest thinking in Sipps, providing up-to-date, comprehensive and practical advice on technical aspects of the Sipp market.
Speakers include Scottish Equitable director (pensions development) Stewart Ritchie, Inland Revenue Pensions Schemes Office technical adviser Chris Smith and Integrated Financial Arrangements group managing director Mike Howard.
The event will be chaired by personal Pension Management managing director and former chairman of the Sipp Provider Group John Moret. The conference takes place at Le Meridien Grosvenor House, London on June 27. Contact 020 7404 3040.