Legal & General and Prudential, two of the highest-profile stakeholder providers have voiced concern over low take-up levels of plans, reopening the debate over compulsion.
In its annual results, Pru said it has set up 9,000 stakeholder schemes in the first half of this year, offering 340,000 employees access to stakeholder, but just 500 people – 0.15 per cent of the total, are contributing to plans.
Pru suggests that in 12 to 18 months it will be advising the Government to review take-up levels, potentially to reopen the question of compulsion.
L&G chief executive David Prosser calls upon the ABI to compile information on how many people take up stakeholder so the Government can accurately monitor sales and review compulsion if necessary.
L&G said 84 per cent of its new pension business had been on stakeholder terms but it described take-up by individuals as relatively slow.
Pru says life offices are reaching the limits on what they can justify in terms of marketing stakeholder to encourage individual contributions within the 1 per cent cap. It argues that ploughing too much into this risks pushing forward the break-even point even further on small business schemes.
Marketing director Sean Tompkins says: “In terms of the new market, where small businesses are designating a provider for the first time and people have not taken out pension provision before, there is not that much money coming in. If the Government wants to achieve its five million new individual savers, it may need to review whether some sort of compulsion is needed.”