I don't know about elsewhere in the country but the rush to sign up for stakeholder has yet to grip North London. Perhaps the October deadline is the date to focus on, given that many businesses I have spoken to recently have little idea of their obligations.
The talking sheepdogs seem to have been left by the wayside. As a friend in advertising informs me, this is most probably due to them being considered insensitive given the foot and mouth problem.
I can see stakeholder becoming Isa Mark 2, with a rush by those outside the original target group to take them out pre-April 5 each year. I wonder how long it will be until divorce actions include the cost of funding the children's stakeholder pensions.
The great and the good are suggesting that compulsion is the answer but this ignores the fact that many individuals simply cannot afford to save. No Government can afford to introduce a third layer of taxation. So, on who will this compulsion fall? The employee? No, I think it will fall on the employer.
This will be of concern to those employers which opted to pay 3 per cent into a group personal pension to gain exemption from stakeholder. I, for one, never advocated this route as I considered 3 per cent to be an initial level and not a ceiling. If you doubt this, look at Serps. When Serps arrived in 1978, the National Insurance rebate meant that schemes could be set up for almost nil marginal cost. But as each five-year review came and went, the rebate reduced and the marginal cost increased. Why should GPPs fare any differently?
Perhaps we should be grateful to Legal & General for its lobbying of the Treasury in favour of the 1 per cent cap as it allows IFAs the opportunity to opt out of the stakeholder arena. I note that Adrian Boulding of L&G now suggests that IFAs will be needed when things get complicated. Given L&G's record in admin, this may not be long in coming.
I personally have promoted designation to my clients but for a fee, which is in stark contrast to the banks offering it for nothing. My clients have accepted the fee when I draw their attention to the fact that the banks are not renowned for their philanthropy and signing up with them could leave the employer open to three years of pressure as the bank seeks to recover its costs.
Without exception, the businessmen have opted to pay the fee, so perhaps there is some light at the end of the tunnel.
If stakeholder is not the solution for the low paid and underpensioned, what is? I believe we all need to pay towards the benefits for this group of individuals, especially if we seek a society where people are not in a constant state of worry in their old age. Compulsion is only the answer if it is the state which is compelled to provide a decent level of pension for those unable to create it themselves.
As to those commentators who see compulsion as inevitable in relation to the individual, can I suggest they actually meet these people before commentating in ignorance?
Is it not time for the practitioners of this industry to be the sounding board instead of providers and those whose only experience is in running big final-salary schemes? Until advisers have an effective voice in shaping legislation, we will end up with more 1 per cent limits promoted by those who can only see the single objective of controlling distribution.
If we are to be able to provide the advice the public needs, we must start to suggest solutions instead of having ill thought-out solutions thrust upon us.
Robert Reid is principal of Syndaxi Associates. To discuss any issues raised, please contact email@example.com.