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Product Matters

With the introduction of stakeholder pensions a profound change is taking place among the serious players in the personal pension market. Price is being driven down.

To compete with the Catmarked stakeholder plan, personal pensions will have to exist inside the 1 per cent structure or demonstrate better value in some way. Or perhaps it is possible to offer everything an added-value personal pension plan and remain inside the 1 per cent charge.

An example of the latter is the Pension One plan from Standard Life. You can see where the title comes from. It is one of a new generation of products that has evolved as a result of stakeholder. There is only one product charge and that is an annual charge of 1 per cent. This results in a reduction in yield of 1 per cent regardless of term or size of contribution – or even less if commission is reinvested and fees charged instead.

The bad news for some IFAs is that this is going to result in lower levels of initial commission.

The plan options are, however, as wide as was previously the case. A wide choice of investment funds, clustering of policies to enable phasing in of retirement benefits and a lot of good news for existing planholders.

For those whose plans which are subject to policy fees, bid/offer spreads and reduced allocation rates, these charges will be removed and only the annual charge will apply. It is a pity other providers do not follow suit and save clients and IFAs a great deal of effort. Stakeholder represents a massive change to the market but already the IFA sector is learning to live with it.

Nick Bamford is managing director of Informed Choice

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