Norwich Union Sales & Marketintg Director, Peter Hales has confirmed that Norwich Union are seriously re-considering their position.
Stakeholder was the low charges private pension launched by the Government in April 2001 with no initial charges allowed, no penalties and only a maximum single charge of 1% pa. E.g. if you invest £20 pm in year1 - then the maximum charge made by the insurance company would be circa £2.40 for the whole year! £2.40 does not even cover the postage, let alone costs for policy documents, administration, advisers costs and commissions.
The Sandler Review, which is proposing to issue a whole range of Stakeholder Products such as annuities, savings and deposit plans in addition to the Stakeholder Pension, is due to announce shortly what the maximum yearly charge will be. Norwich Union are therefore cosnsidering their position pending this.
Our view
If the maximum charge cap is 1% pa, then we can see Norwich Union and many other providers deciding not to offer the plans or pulling out entirely. 1% pa is difficult, perhaps a scale with flat charge should be levied. After all, the unit cost of running a policy is much the same for £50pm as it is for £100pm so why should one pay double in charges. Why should very large investments be penalised.
Likewise though, why should an insurance company or financial advisers not be allowed to charge more than 1% to cover their costs? We believe a realistic charge should be set at around 1.5% pa with a simple administration fee of say £5pm to cover the basic costs for premium collection and administration.
Search the news archive for the Sandler Review and the low charges policy debate.
Learn more about low charged pensions in the Stakeholder Cafe.com.