Since the launch of Stakeholder pensions in April 2001, decision trees put in place by the industry regulator, the Financial Services Authority (FSA) have been under close scrutiny.
A decision tree is designed to take potential Stakeholder pension investors through a series of questions to gauge whether or not they are eligible for the scheme. Although the FSA denied that decision trees are there to gauge suitability for potential investors we would have to disagree.
Many of the questions end with a statement along the lines of 'consider saving into a Stakeholder pension'.
To us, this would indicate the FSA considers Stakeholder pensions a possible suitability. In the finance industry the decision trees have been hailed as a failure for a number of reasons. We believe that whilst they have their place, they don't go far enough to help people decide.
As an example, when taking out a Stakeholder pension you need to decide how much to save. The decision trees give a basic overview, which is helpful. However, that's where it ends and the question on everyone's lips is "which company should I go for and where should my money be invested?" There are no answers to these questions on the decision tree, which leaves the main decisions to chance, or at a cost of seeking advice. Maybe this is why the decision trees haven't worked in the eyes of the industry?
To use one of our quotations from a previous story this week on low income savings: "If you needed brain surgery would you be happy with a hospital giving you a five page manual and sending you home with a DIY scalpel kit and some 'laughing gas'?"
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