Having read the article headlined, Bamford urges Davies to lead Sandler revolt (Money Marketing, July 24),I am struck by how the emphasis is all wrong.
The 1 per cent world is not really Sandler's fault but that of the lemming product providers.
For example, one or two sought to talk to our firm before they introduced stakeholder pensions. They were convinced that they would be highly successful and considered they had the ability to capture 10-15 per cent of the market.
“What for?” I asked. “What good will it do?” My questions fell, of course, on deaf ears.
This year, I have seen a drawdown case of £500,000 (after tax-free cash) where £10,000 commission was paid by a major pension company whose only charge was a little less than 1 per cent a year. Nine months later, the client had switched out and there were no penalties. The provider has made a loss of around £5,000 plus set-up charges.
Now, I hear of a client urged to switch his £200,000 SSAS into an EPP for a monthly premium of £28,000. He has been told to stop the contributions after seven months and I presume this is the end of the clawback period. The reason given? Around £65,000 in commission will be generated and the IFA will pay the client half. Shame on the life company and shame on the IFA who is exposing his client to a huge potential tax penalty.
Where is the product provider profit? Penalty-free stakeholder plans encourage churning and product providers which want to be in this market are all mad. This is the real issue.