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Is the cap up in the air?

Has the Government thrown in the towel on the 1 per cent price cap?

Not yet. But it has certainly accepted that a policy and product dear to its redistributive heart – the child trust fund – can be charged at 1.5 per cent annual management charge.

Does this mean that pensions and the rest of Sandler&#39s recommended suite of stakeholder products will be allowed a price increase?

Certainly, the argument has not been entirely conceded. The Government is still making a defence, albeit a less enthusiastic one of the price cap on pensions, pointing out among other things that the minimum contribution on a child trust fund is a tenner a month rather than stakeholder&#39s £20 so the trust fund is even more expensive to administer.

But most providers will argue loud and clear that £20 is still a tiny sum of money for any private sector company to make pay.

The child trust fund argument was probably conceded at least partly because most big providers said they could not service that market at that price.

It may be after the fact rather than before but surely the same scenario is occurring in the existing stakeholder market where most of the big providers are not playing in the lower premium costly end of the market.

The reality is that there is a providers&#39 strike and no doubt the Government has noticed. It would be difficult to put a cigarette paper between the approach to selling the two products in the lower-income end of the savings market.

The Government has lost its own argument. The great 1 per cent stakeholder experiment is looking more and more unsustainable every day. And yet it still may stick to its guns on the price of a pension but we hope not.


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