Stakeholder Pensions/ MoneySavingExpert.com Discussion Area

DavidLaGuardia

dunstonh wrote:

A stakeholder pension is a defined charging structure within a certain set of parameters. A stakeholder friendly personal pension does really exist much now. Its an old term that was used more before stakeholder pensions were introduced but we knew they were coming. .

I would say a stakeholder friendly pension is one that allows access to funds on the same basis as stakeholder, but may also allow other funds to be selected outside these parameters meaning it cannot be a stakeholder, but for the purposes of those who use only the funds within the stakeholer parameters it is no different.

dunstonh

Its easy to define a stakeholder friendly pension. However, in reality, there are not many of them about. There were concerns issued by a number of compliance departments a few years back that the term stakeholder friendly could be misused and may not considered to be accurate. i.e. If you chose a personal pension with 1% funds, then you could call it stakeholder friendly. However, if that same pension offers external funds at higher annual management charges, it is no longer stakeholder friendly. As the policyholder can switch to those higher charged funds, it isnt SHP friendly. Also, SHP friendly has to guarantee to be no higher in charges than a stakeholder. I'm not aware (but to be honest, having gone looking) of any personal pensions that make such a guarantee. So, my point is that you have to be careful in the use of the term SHP friendly.

DavidLaGuardia

I agree that if a person changes to a fund with higher charges then it can no longer be equivalent to a stakeholder in this respect. The point is that in determining what pension should be chosen for an individual it would be a mistake to say that "only staekholders" would be considered when for that individual, even when led by charges, best adivce might lead to a personal pension with funds that would create a situation no different from stakeholder, and to exlcude it from consideration would be nonsensicle. In respect of the lack of guarantees of future charges then it has to be said that any pension that prevented transfering out without cost would not be considered "stakeholder friendly" in the first place, so a person can always change if their pension ceased to offer favourable terms. In respect of them switching to other funds that charge more then this is a decision to be judged on its merit at the time and is irrelevant to advising on the setting up of a contract with funds within the charging and flexibility demanded of a stakeholder contract.

dunstonh

Sorry, I wasnt saying exclude personal pensions. Indeed, for example, Norwich Union stakeholder "currently" has 4 funds available which, to be honest, are not that great at all. Their personal pension offers their full range of internal funds, all at 1%. So, if charges are a concern, you can go with the PP with NU and get much better funds than the stakeholder and still pay 1%. Indeed, the PP has better discounting as well so it would be better than stakeholder for larger funds. I certainly wouldnt rule out PPs just because they are not "stakeholder friendly"

To go back to my point, i was just saying that the term stakeholder friendly really applied to the 18-24 months before stakeholder launch when lots of PPPs were sold as stakeholder friendly as they matched stakeholder terms. As PPPs have developed beyond that and offer far more than they did then, the term doesnt really apply any more.

tryingtosave_3

I'm about to join my company's stakeholder scheme, and was wondering if I should have any choice over which provider etc. I go with. This may of course be totally dependant on the company policy ... but I was wondering if there are general rules - should I be forced (if I want them to contribute) to go with a particular provider? Is this farily normal practice?

The reason I'm wondering is that every company I've worked for seems to get pensions providers in to do presentations on it, and encourage people to join. If I don't have a choice - I want their contributions - why would they do this? I also have a pension scheme already, and this might offer better value, but I've been told they won't contribute to anything but the group pension, so I have to merge this in, or continue it privately.

If it all depends on company policy, just say. It also doesn't seem to have been mentioned in Martin's article - there must be lots of people who have companys which go with one provider or another??

dunstonh

I'm about to join my company's stakeholder scheme, and was wondering if I should have any choice over which provider etc. I go with.

You have no choice unless the provider gives you a choice. The reason is mainly down to cost. Some providers integrate well with payroll systems and have online administration. Others have nothing. The employer is likely to take the view that allowing different people to have different providers would increase admin significantly. Small employers may allow it or if you are a key employee. However it is totally up to the employer.

nemo183

Martin has done some great research on this topic.

I think the only thing he hasn't stressed enough is that although getting the best deal is the icing on the cake, the important thing is to take action NOW, rather than put it off a few years.

It's probably almost certainly worth starting an average deal tomorrow, rather than the most cost effective one in 2 years time.

There used to be a Life Insurance salesman in the the USA, who wrote several books on how to sell life insurance, and one of his key selling points was to persuade his punter that, if he had no life cover, it was probably best to pay a little more if cover could be started at once, rather than spend a few months shopping around, and maybe end up doing nothing - for obvious reasons.

Likewise, it's probably better to act NOW,with almost anyone, and then fine tune or change companies in a years time, than vacilate between offers and end up doing nothing.......

PS The name of the guy that wrote the books has just come to me - I think it was Frank Bettger

dazman_3

I agree the article is cool and I’m checking right now how much I’m paying for non-existent advice on my Scottish Equitable account! I did start saving early and following this advice will no doubt be worth a lot in the future. However I also believe that moves by the Government to sort out Annuities would have far more effect on our future savings.

I’ll say up front that I’m new to this but the whole old annuity thing, after a lifetime of saving and being forced to buy a structured product that leaves nothing of the original capital at the end sounded very unfair.

I know the site is not strictly about investing. But advice on how this drawdown could be used to someone’s advantage must be worth as much in moneysaving terms as the discount broker advice. Am I right in assuming that this allows your capital to still grow during your retirement, which could be upto 30 years? ! If so this would be very useful to people retiring now after the stock dip (and equitable life etc) where their capital could regain lost ground

nemo183 wrote:

Martin has done some great research on this topic.

I think the only thing he hasn't stressed enough is that although getting the best deal is the icing on the cake, the important thing is to take action NOW, rather than put it off a few years.

It's probably almost certainly worth starting an average deal tomorrow, rather than the most cost effective one in 2 years time.

There used to be a Life Insurance salesman in the the USA, who wrote several books on how to sell life insurance, and one of his key selling points was to persuade his punter that, if he had no life cover, it was probably best to pay a little more if cover could be started at once, rather than spend a few months shopping around, and maybe end up doing nothing - for obvious reasons.

Likewise, it's probably better to act NOW,with almost anyone, and then fine tune or change companies in a years time, than vacilate between offers and end up doing nothing.......

PS The name of the guy that wrote the books has just come to me - I think it was Frank Bettger

EdInvestor

But advice on how this drawdown could be used to someone’s advantage must be worth as much in moneysaving terms as the discount broker advice. Am I right in assuming that this allows your capital to still grow during your retirement, which could be upto 30 years? ! If so this would be very useful to people retiring now after the stock dip (and equitable life etc) where their capital could regain lost ground.

There's a long article about drawdown stuck at the top of this forum. Youy're quite right in what you say, though some pro-annuity types will always want to emphasise the risk.

As always it comes down to following a competent and well thought out investment strategy, along with playing close attention to minimising charges If you remove the charges aspect from a drawdown straegy, much of the risk goes away.

dunstonh

Youy're quite right in what you say, though some pro-annuity types will always want to emphasise the risk.

You mean the regulator, the CII and everybody in the financial services industry.