Stakeholder Pension charge increased

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
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  • paul666paul666 Forumite
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    I think you're right.

    I think stakeholder pensions have been a complete and utter disaster for their target audience.

    I'm not sure that the large pension Co's actually make a loss from them and they are just providing them out of some kind of affection for the general public - However, the paperwork involved in handling £20/month can't be different to £300/month so they must be trying to get more profit by having larger funds and the charging bands reflect this.

    I sincerely hope that any adjustments made by HMG allow many more people to be able to build up some kind of pension for themselves. Unfortunately, it's going to be an uphill battle with all the bad press about pension companies in the last few years. :(

    We're going to need something far more radical at some point - like retirement at 70. or no retirement at all. :'(
  • dunstonhdunstonh Forumite
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    i've mentioned Skandia and Scot Eq as Personal Pensions that can be cheaper than stakeholder in previous posts. Scot life is another which has a Personal Pension that allows lower charging than stakeholder. They allow the remuneration to be taken up front as a fee and the plan to be set up as nil commission. This reduces the annual management charge down. 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.

    I mention that because below is a couple of clips from an article regarding the pension charges from a research provider.
    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.

    and this last bit was interesting:
    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.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • paul666paul666 Forumite
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    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.

    Perhaps, but didn't I read that 50% of personal pensions are cancelled after 2 years because basically people realised that they couldn't afford them?

    Isn't that was why the charges were so disproportionate over the first few years to ensure that the pension company wouldn't lose out.

    And so since there often isn't later years, this kind of pension charge loading is actually very poor value a lot of the time and penalises the people who can afford it the least?
  • dunstonhdunstonh Forumite
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    You are correct that the persistency on regular premiums is poor. Personally i have never had a problem but I guess it depends on who you are giving advice to. If a self employed IFA is giving advice, you wouldnt waste your time on someone who you didnt think would or could keep up premiums. A employed advisor such as a bank tied advisor with big targets would sell to anyone and everyone even if was likely that the premiums would cease.

    Single premiums look very good in these plans though. Which is exactly the area of business these providers are looking for.

    Personally, i find myself recommending stakeholders the vast majority of the time on regular premiums but more and more, its personal pensions on single premiums. I have had cases where the charges were over £10k lower with the personal pension compared with the stakeholder pension. So we arent talking minor differences.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • MilarkyMilarky Forumite
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    DD,

    D'you know the answer to my question (above) about how the higher 'initial' annual managment charge of 1.5% would apply to transfers after, say, 3 years? I've got a 'nasty' feeling that the only way this 10 year higher-cap regime could work if is the clock starts to count down automatically from 10 years whenever money is received - and that 'transfers' will therefore cost more in charges to move than if left with the same company :(?

    Thanks in advance :)

    Milarky
    .....under construction....
  • dunstonhdunstonh Forumite
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    They havent published anything on existing plans yet. That is to follow before introduction.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • MilarkyMilarky Forumite
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    They havent published anything on existing plans yet.  That is to follow before introduction.

    That's not very reassuring is it? Though I accept that when they do EVENTUALLY detail their proposals such details will need to have been addressed. So we appear to have a 'statement in principle' only so far. They will allow 'up to' 1.5% annual charge for 'up to' 10 years.

    [Hummm! It's a good job pensions are long-term products isn't it? They have only had the last 7 years to do something about the general issues and, as we have seen over recent the crisis in FS schemes, the temptation is to sit on the fence until well after 11.59 ::) ]
    .....under construction....
  • rockbaberockbabe Forumite
    141 Posts
    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!
    An Optimist laughs to forget...A pessimist forgets to laugh

    Please thank me if you found this post useful! :)
  • dunstonhdunstonh Forumite
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    rockbabe wrote:
    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!

    That isnt how it works. Most of the pension providers offer similar funds and at varying times, one will be better than another. You need to look at where you want to invest and how you want your portfolio set up and then look for a provider that can do that for you. For example, if you wanted global property to form part of your portfolio, you can elminate those providers that dont offer global property.

    As it happens, the NU stakeholder is being withdrawn on 5th April and replaced with a lesser version. However, the NU personal pension is better than the stakeholder and is cheaper.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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