I am amused by the story that actuaries have their sums wrong over stakeholder (Money Marketing, August 19). Yes, of course they have, but as things stand at the moment, no matter how high the annual management charge, this will always be the case.
By removing front-end loads and surrender penalties, it is like a car manufacturer giving away new models for free and hoping to make money by adding a little bit on to the cost of servicing the vehicle. At any time, the person who bought the car can take their vehicle to be serviced elsewhere or swap the car for a new model.
The Treasury has now allowed the dealer to increase its servicing costs by 50 per cent. So what? In a competitive market, the increase cannot be passed on to the consumer and the purchaser can still go elsewhere at any time. If the higher cost is passed on to the policyholder, it makes it easier for another garage to service the vehicle at a lower cost later.
The only way that this can work is if the purchaser is tied to a dealer for a number of years using capital units or if there is a very significant change to the way that the product is manufactured and distributed. Until this happens, we can increase the annual charge as much as we like but stakeholder will still not be viable.
Head of sales and marketing,
RGA UK Services,