Unofficial end of stakeholder pensions? RU64 being withdrawn.

Paul_Herring

http://personalfinance.iii.co.uk/articles/articledisplay.jsp?section=Pensions&article_id=2278409&catEnforce=Latest%20Pensions

EdInvestor

Hardly surprising. The charges cap has already been increased by 50% and few providers offer really good funds on stakeholder terms,since they can't make any money on this basis.

Since the charges are so high the punter can't make much money, interest in pensions has dropped, which isn't surprising either.

Something will have to give.

dunstonh

Silly article full of flaws and assumptions.

RU64 doesnt block personal pension sales at all. It just requires justification of why a stakeholder wasnt chosen. Justification is not a problem at all as stakeholders have been left behind by improved personal pensions and SIPPs.

Stakeholder was a success in bringing overall charges down and bringing in a greater focus on charges. However, it is now being left behind as it isnt possible to offer features and funds in a stakeholder which are present in better personal pensions and SIPPs. Plus, a number of providers can offer cheaper personal pensions than stakeholder over the term but still offer the features that are on the personal pensions.

It appears that most of the responses on that article have covered many of the other flaws in the assumptions. It's a shame that some of the media prefer to incite hate rather than look at issues objectively.

EdInvestor

Adair Turner’s recent Pensions Commission recommendations include establishing a National Pension Savings Scheme with benefits that improve on even stakeholders for most people, with automatic enrolment and employer contributions to make it fly. This will remove the whole Catch 22 of people needing to be sold to by ‘advisers’ taking too much of their savings for the privilege.

Do you think this is silly DH?

The powers that be seem to be taking it seriously, including the lifecos.

dunstonh

Do you think this is silly DH?

yes I do. Adair Turner failed in a number of areas.

No other country has succeeded on a charges level double at what he suggests, let alone his level. To assume people will buy a pension and contribute to it with a certain level is foolish. Pensions for the majority need to be sold. Decent contributions need to be sold. Any advisor will tell you that most individuals think that £20-£50pm is all the need to save. Many wont bother until they are "sold" into doing it.

A forced enrolement will have such a small percentage and runs the risk of individuals thinking that they are making their contributions and dont need anything else.

If you were to abolish pensions today and replace it with exactly the same generic product but a name that doesnt have pension in it, it would stand a much better chance of succeeding. There is a stigma in the word pension and totally incorrect assumption that pensions are bad.

The problem with pensions is not the product or the current pricing. At its current level, it is good value for money and advisors can advise and earn on it. The problem is the total lack of understanding of what retirement planning is. Not pension planning. Retirement planning. Coupled with the swear word that is "pension"

cheerfulcat

dunstonh wrote:

Pensions for the majority need to be sold. Decent contributions need to be sold. Any advisor will tell you that most individuals think that £20-£50pm is all the need to save. Many wont bother until they are "sold" into doing it.

I'm afraid that you are right that people have to be persuaded into saving, and saving sufficient amounts at that. For now it will have to be packaged products and IFAs, for want of anything better ( no offense intended as you know, dh, ) though it would be nice if the government encouraged general savings a wee bit more, too. An increase in the ISA limits, perhaps, or even better, the ability to put money into a mini cash ISA and a maxi stocks and shares ISA every year.

EdInvestor

I'm afraid that you are right that people have to be persuaded into saving

I wonder. If they got auto-enrolled into a scheme at work @4% of salary plus free money of 3% from the company and 1% from the taxman, I wonder how many people would make the effort to leave the scheme?

Combination of the inertia and 50% free money might see quite good take-up.

ManAtHome

Have to agree with DH about the P word - how about 'deferred MegaISA' (tax relief up front instead of afterwards). Amazing how much interest there suddenly was when GB(H) fleetingly linked the other P word... mind you, we don't get newspaper headlines like "stock prices up over 60% in 2 years, yer average FTSE could be at 19,237 in 5 years time" (perhaps the FT does? LOL).

As you guys keep telling us, there's not really such a thing as 'a pension' - just thousands of options in a tax-efficient wrapper, but any bad publicity about a specific fund seems to turn a lot of people off all the other funds. Surprised the 'industry' in general hasn't been more vocal over the last couple of years about the rapid improvement since the dark days of 2003 considering the slagging it received at the time.

cheerfulcat

EdInvestor wrote:

I wonder. If they got auto-enrolled into a scheme at work @4% of salary plus free money of 3% from the company and 1% from the taxman, I wonder how many people would make the effort to leave the scheme?

Combination of the inertia and 50% free money might see quite good take-up.

But by the time the lifecos got their paws on it there wouldn't be much left for the would-be pensioner...in any case, I don't think that 8% of salary is anywhere near being enough. And I have a feeling that it would be resented as a tax.

EdInvestor

Perhaps you're right CC, especially if the "swearword" attitude has become as widespread as DH seems to think.

Perhaps it's all a bit academic anyway, since the property market seems to be reviving.I note BTL lending was up a whopping 39% in the second half of last year.

Looks like "My house is my pension" could be the new black.

Pal

I think that "My house is my pension" will soon be the new "historical bubble", especially if most of the country has to take a 7% paycut to contribute into a compulsory pension scheme. BTL will be the new misselling scandal.