Stakeholder Accounts? What's all that about?

isasmurf

Stakeholder Accounts? What's all that about?
You may well ask. You may have heard of Stakeholder Pensions, and the Stakeholder Child Trust Fund. Well, from 6th April you can also get a Stakeholder Cash Account and a Stakeholder Medium Term Investment Product (MTIP). The Cash and MTIP will be available both in and out of an ISA wrapper.

These 4 stakeholder products, known as the 'Stakeholder suite' came about following a recommendation in a review into medium and long term savings. They are designed as easy, low cost products that can be bought 'off the shelf', i.e. without the need for much advice.

However, only a few providers have said they intend to launch a Stakeholder branded product on the 6th April, which perhaps isn't surprising given the lack of success with the Pensions version.

They work similar to the CAT standards that currently operate on ISAs, and in fact will replace the CAT standards in ISAs. What I mean by that is to be Stakeholder account, like being CAT marked, you have to operate the account/fund subject to certain conditions. These conditions are

Cash

• Minimum deposit no higher than £10
• Unlimited Withdrawals, and access within 7 days
• No charges
• Pay into the account in any of the following ways: cash, cheque, direct debit, standing order, direct credit (e.g. BACS)
• Interest Rate must be no lower than 1% lower than the Bank of England Base Rate, and the minimum interest rate must be raised within 1 month of a base rate rise.

Medium Term Investment Product (Stocks & Shares in an ISA)

• Annual charge limited to 1.5% of the fund during the first ten years and 1% thereafter.
• Minimum deposit cannot be higher than £20.
• No more than 60 per cent of the fund is invested in riskier assets such as shares.
• You can pay into the account in any of the following ways: cheque, direct debit, standing order, direct credit (e.g. BACS).
• The prices at which units or shares in the fund are bought and sold must be the same and the price should be published daily.

Additionally smoothed MTIP products apply the following terms

• Some of the return in good years is paid into a ‘smoothing account’ to be used to top up the return in bad years.
• If the smoothing account needs extra capital, policyholders can be charged extra.
• Managers must make available information about their policies on smoothing and charging.
• The whole with-profits fund and the whole smoothing account, apart from specific deductions allowed by law, are for the benefit of policyholders.

Source: FSA

dunstonh

The feeling is that the banks will use sandler products heavily. No surprise as Sandler is an ex banker and does seem to favour the banking distribution method.

Expect your unqualified bank clerks to invite you in to speak to a sort of advisor who will go through the sandler sales process (much like flow charts). You will actually self certify the advice leaving you with virtually no consumer protection or redress if you buy a sandler product using the sandler sales process. If a sandler product is purchased using the full advice process, you will have full consumer protection.

FYI, sandler suite of products/sandler sales process is the other name being used for stakeholder. They are the same thing.

The products certainly have their place but are focused on the low budget end of the market and mass distribution channels (which really only means banks at this time).

deemy2004

The term stakeholder is clearly jinxed !

These products are also likely to go the same way as the stakeholder pensions and be a big flop...