My first thought is ”what’s the point”. This is probably too little, too late to save stakeholder pensions. Witness the number of flexible remuneration plans that have been launched of late and compare that to new stakeholder launches. Perhaps, when we now have contracts that more closely reflect the cost of setting up a pension to both the product provider and adviser and still have RIYs of 1% or less, stakeholder has already been put in the coffin, taken on a blue pallor and started to smell but the mourners are insisting that they can hear the deceased’s knocking.
Increasing the cap is likely to simply speed the burial. If many stakeholder policies are already poor value in the long-term, any charged at the new maximum rate will only be worse. Furthermore, allowing only a single annual charge, albeit an increased one, does not reflect the administration cost to the providers or the cost of advice. In short, providers will still need policies to run for several years before they turn a profit on them and initial commissions are still likely to be in short supply. The funny thing is that, by increasing the cap in the earlier years of policies, the government seems to have finally admitted that there needs to be some form of front-end loading (for want of a better term) but has come up with a botched compromise.
However, one potentially major problem is that most stakeholder providers’ policy documents state that they can increase the charges if allowed to by legislation. Only Clerical Medical and Scottish Mutual have informed us that they have no such wording in their contracts. [However, the former has told us that, if legislation is changed to allow stakeholder plans to be closed to new increments, it will be able to do so with its current policies.] This could cause a howl of protest from pension scheme members.
Like the others, it is more expensive in the early years but much better value in the later years, providing you have enough years until retirement.
They havent published anything on existing plans yet. That is to follow before introduction.
Does anyone have any idea which insurer offers the best 'Stakeholder' pensions in terms of returns/performance, is it Norwich Union? or are there better choices out there.
I'm trying to sort something out before the end of this tax year if that's possible.
Thanks in advance!
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