I was very dismayed to read your leader of October 18. In my view this is precisely the sort of thing that gives the industry a bad name.
I eschew stakeholder in its intended form for a very simple reason – it is a lousy deal for the target market.
We all know it trips over the minimum income guarantee, that the pension credit is in effect a 40 per cent tax.
Then there is the issue of how much the policyholder will have to contribute to make any pension, let alone a stakeholder, worthwhile.
Why should firms, who are under enough pressure already, succumb to what is in effect further taxation by contributing to a stakeholder pension?
Much of this was in fact pointed out by Tim Wilsdon on the very next page in the same issue in his excellent analysis. What about some real Government incentive – give back the tax you are taking on the funds.
Those who are in greatest need of a pension probably have, by definition, a shorter lifespan. As Stuart Ritchie has so ably pointed out, what will happen when they get to retirement with their small fund? Buy a “crap” annuity which will probably not last very long?
What other products do they not have which may be of more relevance and immediate importance to them (life cover, ASU)?
Perhaps the idea of no proof of income up to £2,808 is not so much to encourage those with no money to find what they have not got to put into a pension, but rather “tag” those in the black economy for a Revenue investigation?
Stakeholder is a pretty good product for those who save anyway. Company directors and the better off have many benefits under stakeholder.
Commission is not an issue. They invariably either pay fees or place considerable volumes of other classes of business to enable stakeholder for them to be a “loss leader”.
All these issues seem to be conveniently swept under the carpet and all will be made well with increased sales drives underpinned by better commission.
A lousy deal is a lousy deal, no matter what commission the adviser is paid. Are you surprised we get a bad press?
Norwest Consultants, Stanmore, Middlesex