Tory MP and Shadow Minister for Work and Pensions, Oliver Heald, has brandished stakeholder a flop. His claim, published in the finance industry Newspaper, Financial Adviser, was that less than a quarter of the target membership for Stakeholder schemes taken out had been achieved. He said "This was supposed to be the pension for basic rate and starter rate taxpayers. It has been a flop".
Our view
What a shocker!!! We have only be saying this for three years!
Our view was that Stakeholder was designed to be a flop. We have argued for years that the key to encouraging people to save was education. Having fantastic terms for pensions with low charges are great for the consumer, but the commission available is low and therefore the mass of financial advisers and insurance companies cannot afford to market or advise on them.
To put it in simple terms, the maximum charge is 1% pa. Therefore, if you pay £20pm into a pension, you will pay in £240 in year 1. You will have no initial charge deducted and only the 1%. That's approximately £2.40 in charges! Given that it costs an insurance company about £400 to set up a policy and that an advisers cost in time and advice, research and recommendation reports to a client would be around £300. Is it any wonder that Stakeholder has failed?
As ever, and we restate, the only way to encourage people to save is:
1) Education for the public - at school , at work, at home, on TV, on line etc.
2) A stronger regulator who actually does what it is supposed to do.
It is our opinion, and always has been, that the Government introduced Stakeholder, with it being designed to fail. However, now that virtually every employer has a shell scheme in place with no employees having joined, how long will it be before we start being "educated" on compulsory pension contributions?
Learn more about low charging Stakeholder pensions in the Stakeholder Cafe.com.
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