The regulatory amendments that accompanied the introduction of a lifestyling component as a default fund in stakeholder schemes see the Department for Work and Pensions change the rules to allow providers to maintain closed books of stakeholder business.
Previously, providers which did not meet all the requirements of the regime had their schemes forcibly wound up but the DWP has acknowledged that some firms may struggle to offer a lifestyling vehicle and so might opt to pull out of the market.
Hargreaves Lansdown head of pensions research Tom McPhail says the regulatory changes provide a get-out clause for less committed providers. There are currently 45 pro- duct companies battling it out for assets in what is a volume business.
The number of providers peaked at 51, according to Opra, but schemes previously offered by AIG Life, LICI, The Share Centre, Direct Line, Nat West Life and Royal Scottish Assurance have since been wound up. Many open schemes are not actively chasing new business.
McPhail says: “Providers needed to be open to new business until now but because many stakeholder providers are struggling to make a profit, many will close their schemes and run off their books of business from next April.”