Nick Bamford, managing director at IFA firm Informed Choice says: "Because the margins involved with stakeholder pensions are very tight, the efficiency of administration will be very important in choosing between companies.
"Online adminstration will be the future. Small IFA firms, such as ours, because of tighter margins will have to give added value in terms of advice, and the best way to do this is to cut down on administration. Online administration is less labour
intensive, so cutting down on paperwork will not just cut down my costs but the product providers' costs as well."
Charles Levett-Scrivener, product services director at IFA firm Towry Law, agrees that the quality of a firm's administration is important. But he also points to the financial strength factor.
He says: "A pension is invested over a long period of time and there is always the risk that some players might vanish from the market over this period."
In the past, some companies failed to ensure that the administration of their pension schemes ran smoothly, which led to problems for pension investors.
In May 1995, Prudential announced that it was trying to trace up to 25,000 people who had tried to contract out of the state earnings-related pension scheme (Serps) through one of its personal pensions between 1987 and 1988.
Some of these customers had not had their paperwork completed by administrators within the company. As a result they never contracted out of Serps at all, forcing Prudential to pay £4m in compensation.
Bamford says: "One company that I have had trouble with in the past has been Scottish Equitable, although to be fair I know that it has invested money to put this right. I don't forsee many problems with administration in the stakeholder era. I am confident that most companies will have invested massive sums in administration, as otherwise they run the risk of major failures in the post April 6, 2001 period."
Jon Minchin, managing director of IFA firm Pensionline says: "My own view is that if I was looking at a stakeholder pension, I would wait until the middle of 2001. Firms are still deciding about entering the market. I think that some companies will be offering a massive selection of fund links, which it will be hard to compete against."
In a year's time the picture for the stakeholder market should be clearer.
Product providers and IFAs hope to see some concrete evidence of the way that the stakeholder market will be operating by then.
Additional funds will also have been introduced and the number of companies offering external funds may increase, depending on attitudes to the one per cent minimum charge.