We are witnessing one of the most hyped launches the British public has ever experienced. After a couple of months of publicity on TV, radio and all over the national press, people will now be flocking to buy one. It has been difficult to miss the publicity machine in its efforts to ensure a best seller.
I am, of course, talking about the first output from ITV's much-hyped Popstars – a single called Pure and Simple from the group picked from a cast of thousands. The big question on the tip of everyone's tongue (not) has been whether the group, now called Hear'Say, would hit number one in its first week.
Before the editor wonders why he asked me to write this article, I better start making some points here.
Another much-hyped product is also about to be launched. But that is where the comparison ends – except perhaps that, like Myleene, Kym, Suzanne, Danny and Noel, stakeholder pensions have a juicy previous life which the tabloids always like to drag out and exaggerate.
Despite the media coverage, the launch of stakeholder has so far failed to engage the British public. Surveys continue to show consumers do not know or understand anything about it. More worrying, most employers are not aware of their obligations under the legislation. We need to engage the public to contribute to stakeholder, otherwise employer designations are just red tape for the sake of it.
Two key factors needed to make stakeholder a hit are consumer awareness and confidence. While we may think stakeholder is “pure and simple”, it is immersed in a mire of complicated pensions and FSA regulations that make the sales process anything but that. Moreover, it is difficult for consumers to have confidence in planning for retirement when the state may or may not provide means-tested benefits. That is why NU featured the need to focus on rights and entitlements to state benefits in its response to the Government consultation on the pension credit.
I personally believe stakeholder will get to number one in the bestseller chart and that personal pensions will decline. I can see a market for both over the next couple of years. However, this is not the Government's target market of low and moderate earners but, typically, those earning over £163.20,000, their spouses or perhaps even children.
What does this mean for IFAs? As many of their clients become aware from the media hype that stakeholder is here, they will look to IFAs for guidance on their retirement planning. Many existing clients will ask whether they should transfer to stakeholder and I am surprised some providers are not improving terms for existing customers and are presumably happy that IFAs recommend transfers.
IFAs will also need to advise employers on what to do and NU has made the designation process as easy and hassle-free as possible for employers and IFAs.
So there are lots of opportunities for IFAs, especially as some companies withdraw their direct salesforces or, in some cases, are forced to withdraw them. Like product providers, IFAs will need to plan carefully and focus on being more efficient. I will be surprised if some IFAs still recommend products where the fund charge is as high as 1.5 per cent in an environment where switching to products with charges up to 1 per cent will become the norm.
NU believes stakeholder pensions are not Hear'Say but Here Today. Well, almost.
Jerry Barnfield Is director of pensions development at Norwich Union