The Government has confirmed that pensions companies will not be able to increase their pension charges on Stakeholder Pensions above the current limit of 1% pa. The finance industry has been lobbying for some time that the 1% limit was too tight and left no room for covering the costs of administration, charges etc.
Our view:
Insurers, pension companies and advisers have obviously found it very hard to deal with this. For example, if you pay in £300 pm into a stakeholder pension. This is a huge amount for most of us. However, to an insurer that is £3,600 in year 1. The maximum charge is 1% i.e. £36! Out of this £36 the insurer is required to pay for administration, costs of advice etc. Taking it further, if you invest £20pm that is £240 in year 1. A 1% maximum charge is around £2.40! Is is any wonder that the industry wants change. It takes an insurer around 12 -15 years to break even on this type of contract, let alone make a profit or pay their staff. Stakeholder will not survive. Visit our site Stakeholder Cafe.com .