Stakeholder/Personal Pension 2005 update

dunstonh

Norwich Union, Standard Life, L&G and Clerical Medical have said they intend to launch new pension products next year which are not stakeholder compliant.  Scottish Widows and AXA are waiting for clarification from the FSA before they announce anything.  FP is planning a stakeholder relaunch after the 1.5% cap is introduced.  Pru is rumoured to be going back into the market at that time due to the multi-tie situation.

NU have said that they will maintain a stakeholder pension for the non advice/basic advice sector but will have a "cap busting" pension with a wider fund range for the full advice market.

My "guess" is that they are looking at something like the personal pensions offered by Skandia, Scottish Life and Scottish Equitable that have higher initial charges than a stakeholder, which cover the cost of advice at the point of sale, but can have lower charges over the term which can make them cheaper than stakeholder if held with the same provider until retirement.   These pensions tend to favour the under 40s whereas stakeholder favours the over 40s.

There was nothing quoted to say whether the exisiting stakeholders or new ones after 2005 would utilise the new 1.5% annual management charge.   My expectation is that single premiums/transfers will get 1% or lower charges as current as they are profitable.  Whereas regular premiums will use the 1.5% amc but get discounted when going about certain valued tiers.  

Companies saying that they are going to "relaunch" after the cap increase suggests that they will use the 1.5%.  Otherwise why wait until then

Milarky

It's a 'step backward' in some senses, however.

At the moment we have stakeholders already sold. Part of the sales pitch for these was 'make it simple'. But they are too simple to make make profit it seems.

So a new cap will come along which may or may not apply to parts of existing plans and the companies themselves won't be required to run with them anyway since - as you suggest - they simply could offer products with long term discounts and market these as direct alternatives.

I suppose my point is why can't there only be one type of pension plan rather than a clutch of them? I suppose the 'prototype' exists there in the stakeholder and that many non-stakeholder products will remain directly comparable - so the customer need not become confused by this 'choice'?

dunstonh

I dont think it will be too bad.

Stakeholders will be a non advice product with a limited range of options and funds. Cheap and cheerful.

Personal pensions will be an advice product with an alternative charging structure with many more options. The charging structure may be better or worse over the term depending on the options selected.

From what has been indicated, PPPs will only be available on an advice basis and not direct.

isasmurf

Stakeholders will be a non advice product with a limited range of options and funds.  Cheap and cheerful

Which is exactly what they were meant to be was it not? Pensions that could be bought 'off-the-shelf' without the need for financial advice - although I always think you need advice for anything like this.

dunstonh

Malcolm Wicks, the pensions ministor has said that the changes in the stakeholder scheme are still up for consultation until 17th December.

However, the big news its that the charges cap will remain at 1%pa for schemes started before April 2005.

So, start your stakeholder pensions now before the charge increases.