View more on these topics

Stakeholder companies face a decade of losses

Pension providers face more than a decade of losses on stakeholder pension plans if they try to pay IFAs commission, according to actuarial calculations carried out for Money Marketing.

Actuarial projections calculated on stakeholder profits show the break-even point for IFA-commission-paying stakeholder plans is up to 11 years after start-up.

Comparable figures for internet-based distributed schemes show a life office could break even after two years.

The research confirms only those life offices with deep pockets will be able to compete. It will also stoke fears among the biggest providers that vulture funds may swoop to take their stakeholder business long before they have made a return on it.

A typical IFA stakeholder product paying commission of 42 per cent of Lautro rates and 0.5 per cent renewal commission with the same level of charges will not break even for 11 years.

A plan based on 0.3 per cent fund-based commission for IFAs also takes 11 years to break even.

The findings show that life offices could be taking a gamble by choosing IFAs to deliver stakeholder market share with much of the cru-cial early years&#39 costs leaving them open to predatory vulture funds.

The actuarial scenarios illustrate how life offices will have to manage costs to stay within the 1 per cent charging cap while working towards profit.

The models suggest IFAs working with stakeholder face the potential of being forced out of the market.

Legal & General pensions marketing director Andy Agar says: “These figures do not surprise me. They show that high levels of commission are not supportable.”

One industry expert says: “These figures clearly show that pressure on margins means stakeholder may have to be offered without advice.”

Standard Life assistant general manager (marketing) Graham Storrie says: “We have all generally accepted the industry is under significant pressure. We and IFAs have got to look at the efficiency of our businesses.

“There is potentially a threat from vulture funds. One sensible way of dealing with this is to reduce the annual management charge as the funds under management increase.”

Details and break-even statistics, p12-13.


Bristol & West rebuked by consumer watchdog

Former building society Bristol & West has been reprimanded by watchdogs for paying poor rates of interest to 4,000 savers. The Banking Code Standards Board has ruled the bank owned by the Bank of Ireland was breaking the rules by offering lower rates of interest on accounts that are no longer marketed. Bristol & West […]

Venture into the jungle

Clients could be losing out if their IFAs ignore the investment returns from the unquoted sector. The cost of due diligence is beyond the resources of most IFAs but they should not be put off exploring the unquoted sector jungle.The Inland Revenue defines unquoted companies as those whose shares are either quoted on the AIM […]

Standard in mailing blunder

Standard Life is issuing IFAs with an unqualified apology after an admin bungle potentially offered thousands of IFA clients advice on stakeholder pensions.Money Marketing was inundated with phone calls and letters from enraged IFAs who believed Standard was trying to cross-sell to cli ents they had introduced to the life office.The glitch came to light […]

Treasury proposes widening Catmark

The Government is considering extending its controver sial Catmark standards across the board of financial products.As part of the Treasury&#39s response to the Cruickshank report, it will carry out consultations on the plans with the industry.The move has raised fears of a Government-enforced price structure which would restrict choice for IFAs and consumers by forcing […]

Phone - thumbnail

Pension Wise — now taking calls…

Those with decent-length memories will recall that in the 2014 Budget statement George Osborne announced the new (and entirely unexpected) pension freedoms. The new rules come fully into force in less than two weeks.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm