View more on these topics

Is stakeholder a new breakthrough?

Anyone who has sat through Steve Bee&#39s marvellously witty but erudite


conversations about pensions cannot fail to have spotted that this is an


area where no idea quite works out as originally intended.


They may start with every intention of opening up the market in a new and


exciting way to reach the unpensioned and offer new opportunities for


easier financial planning but somehow the end-result never quite fitsthe


bill.


Is stakeholder a new breakthrough or more of the same? The idea is not


bad. Individuals, even on modest incomes, should be able to save with some


flexibility and security for their old age in an account which bears their


name and where they can have confidence about the charges deducted from


their fund. But somehow this objective has become obscured.


There has been perhaps over-concentration ona charging cap which leaves no


room for the advice which many undoubtedly will want to have if they areto


take out a stakeholder pension. Many willbe at the mercy of decision trees


which theymay find difficult – and certainly will find boring -to complete.


Then there are mixed messages. Telling individuals that they should save


for their old age is fine. Expectations of what individuals want to do in


old age are rising and, if those expectations are tobe met, then planning


throughout a working life becomes essential.


But the message becomes confused when it is set against the creation of


the minimum income guarantee. I am not questioning the social value of the


Mig but it clearly adds a complication. Is a stakeholder pensiona suitable


investment or a means of scrimping and saving to deprive oneself of a


benefit already guaranteedby the state? Is there any way out of this


paradox?


I suggest that there are two potential “get out ofjail free” cards.


First, the Government must be hoping for some enthusiasm from employers


about the whole stakeholder concept.


If employers can be prevailed upon not just to offer stakeholder but to


offer it perhaps with an advice element paid for by the employer, than a


better environment for the success of stakeholder can be created.The same


action by a trade union would have the same result. But I suggest to both


that they would be well advised to keep well out of the advice or


quasi-advice game. If they appear to be pushing for the stakeholder concept


to individuals, then they had better get proper qualified support or they


will be doing themselves and their members/employees a disservice.


The second issue concerns what an individual cando with the stakeholder


pot when he or she comesto retirement.


At present, the idea is for an element of cash-free lump sum and an


annuity. The annuity could well be at a level which is of no use to the


investor but simply excludes state benefits.


This may be good enough for the socialsecurity budget but the prospect is


scarcely going to encourage investment in this new concept.


What is needed is far more flexibility in how the money is taken. If a


total stakeholder pot is below a prescribed level, then why should the


investor not take the entire pot, rather as though it had been saved in an


Isa and not bother with setting up a paltry annuity? The value of the


saving would not be undermined, and the confidence with which an individual


would feel able to go into a stakeholder contract – or be advised to go


into one – would be enhanced.


There does need to be some imagination from the authorities if their


latest good idea is not to be drowned in its own contradiction.

Recommended

Tech upgrade could mean huge IFA bill

IFAs could be facing bills of up to £65 per computer to meet thetechnology requirements of their networks and soft-ware packages.Many networks are recommending that IFAs use Windows 98 as their operatingsystem rather than the outdated Windows 95.DBS is introducing minimum technology requirements for members, whichstarts for existing members in April 2001. It is recommending […]

Sun Bank in ad push to forge more IFA links

Sun Bank, a subsidiary of Sun Life Finance of Canada, is starting on ayear-long marketing campaign to raise its profile among IFAs.The aim is to increase sales of the bank&#39s range of flexible mortgage products.Currently, 25 per cent of Sun Bank&#39s mortgage sales come through IFAs.The campaign kicks off with a series of ads in […]

Virgin in U-turn as it asks IFAs to sell GPPs

Virgin Direct plans to work alongside IFAs despite a previously fraughtrelationship with the industry.The move comes just weeks after Virgin slammed IFAs for neglectingemployees in GPP schemes.But the company now says it plans to use IFAs to sell its“stakeholder-friendly” group personal pension plans to employers. Thecompany still intends to use its own telephone-based salesforce to […]

Life offices back move to protect low earners on pensions

The Financial Services Consumer Panel has won the support of life officesin its bid to urge the FSA to protect low-income consumers from misbuyingstakeholder pensions.The panel, which represents consumer interests in the development ofregulation for the financial services industry, says stakeholder threatensto leave the low-paid worse off.Chairman Barbara Saun-ders says the issue of affordability has […]

Three catalysts for European equities

By Rob Burnett, Manager of the Neptune European Opportunities Fund In recent weeks, the bear case for European equities has become more pronounced on the back of weaker-than-expected GDP data and deflation concerns. This softening in economic momentum has led some investors to question whether the ECB is behind the curve and indeed whether it […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    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

    Email: customerservices@moneymarketing.com