Legal & General has leapt upon the stakeholder bandwagon with the introduction of its group stakeholder pension.
Aimed at employers of all sizes who are looking to fulfill their legal obligation to offer a stakeholder pension, the pension has a minimum group size of one, and a minimum premium of £20 a month per person.
People investing in the plan can choose from up to 29 internal Legal & General funds. These include eight lifestyle funds, which operate as normal pension funds until five years before the investor retires. From this point they transfer the investors money into cash and gilts in order to minimise the effects of any stockmarket fluctuations. The other funds available include actively managed and index tracker funds. The default fund is the UK equity index lifestyle profile fund.
There are also 16 external funds, managed by Newton Investment Management, Deutsche Asset Management, SocGen Asset Management and JP Morgan Life Assurance.
The level of risk varies from fund to fund, going from low to medium and high risk, with the external funds also varying in risk. The pension offers unlimited free fund switches.
The annual management charge is tiered and depends on the monthly premium and the amount of commission taken. It varies between 0.3 per cent and one per cent. The external funds carry an additional 0.15 per cent, subject to the one per cent maximum.
This stakeholder pension has been designed for people who do not have a pension scheme and who might also be new to the world of investment. Although offering a wide range of funds can offer a broad spread of risk, it can also lead to confusion for the average investor. The inclusion of tracker funds can also be risky over the short term, as they can track an index down as well as up.
Of the 29 Legal & General pension funds, according to Standard & Poors, five are first quartile, eight are second quartile, two are third quartile and two are fourth quartile, based on £1,000 invested on a bid to bid basis with gross income reinvested over one year to April 16, 2001.