Reasons for PP over Stakeholder - question for IFAs

a7man

Norwich Union offer a pension plan and a stakeholder under exactly the same terms, except the fact that the PP has a larger choice of funds & the stakeholder has guaranteed charges.

Is the availability of these extra funds a good enough reason to invest in the PP even though the client probably wont make use of them and will stick to internal funds?

I am thinking in an FSA perspective if you were advising a client & reasoning you would use.

dunstonh

Is the availability of these extra funds a good enough reason to invest in the PP even though the client probably wont make use of them and will stick to internal funds?

Ha, yes. This is something that the recent pension review has brought up.

Common sense suggests that where the two products are the same in every way except one offers a larger fund range, then that one is the one to go with. But common sense doesnt always apply.

When both the SHP and PPP are mono charged and identical apart from fund range is greater on the PPP, I dont think you would fall foul of the FSA. I know one of the 30 firms that had their pensions reviewed and it was the lack of stakeholder pensions that drew the FSA to them. I know they have some remedial issues to sort out but no bad advice. The FSA focused on the personal pensions that were more expensive than stakeholder. Not the ones that were the same or cheaper.

However, if it is how you suggest, I would go with stakeholder. My reasoning would be that it isnt likely that external funds would be required and that the Stakeholder pension has the guaranteed cap on charges whereas the personal pension doesnt. And Norwich Union will allow an internal transfer from the stakeholder to the PPP at a later date if required.

Its stupid really because stakeholders are going to be abolished in 2012. They dont fit with the new charging requirements and the NPSS effectively takes over. Plus, most providers have moved to 1% on internal funds.

a7man

excellent answer, many thanks