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Are Stakeholder Pensions Good Value?

Stakeholder pensions became known for introducing cheap, affordable savings vehicles to the masses. Since their launch in 2001, they have made little impact on the market and the "savings gap" continues to widen.

Most of us will, of course, be just concerned about our own savings gap, and wonder whether Stakeholder is the best route to save.

Providers (Insurance Companies) have struggled to provide the product on the basis of a 1% charges cap, and as a result the ceiling of 1% will be lifted from this April to permit a charging structure based on 1.5% pa over the first 10 years of the plan.

This will help the Provider cover the set up costs which include paying for advice. For independent financial advice on Stakeholder pensions click here.

On the subject of advice, Stakeholder pensions carried with them a wonderful flowchart called a decision tree where a consumer was supposed to be able to work out for himself whether he could save in one, how much he should save and which funds to invest in. Some of us (IFAs) have trained for many years and would still take many hours of research and deliberation before being able to come up with the best formula. Under the new "Basic Advice" regime from April, Stakeholder products can be sold by unqualified sales people who will, after asking a handful of questions, be able to set you up with a plan, regarded as being suitable if not the most suitable route for you.

Under such a scheme, you may get a choice of ONE fund to invest in. It may be the Equity Fund of the chosen provider, or you may opt for the With Profits Fund, for example. You will quickly start to see the dangers here, in that you do not get advice about your overall situation, and the rationale for investment is that the sales person will not have any decision to make about where you put your hard-earned cash.

We as advisers have to go to great pains to explain to an investor the reasons why we might not be recommending a Stakeholder product ahead of a Personal Pension (ie not Stakeholder). I think the "reasons why not" just got an awful lot easier.

There will be exceptions, of course, and we may see the larger providers continue to offer a range of funds and perhaps even keep the costs down. But where low costs are the biggest driver, are we really going to get the quality of fund choice? It is quite a drop from the top of the performance charts to the bottom, and it might be worth looking at future potential of the invested funds instead of how much the fund manager will deduct in charges. It’s time to take advice in order to make the most of your savings. Act now – you’ll be retiring tomorrow!

At the end of the day it is ESSENTIAL to take Independent Financial Advice before purchasing ANY financial product.

To contact an Independent Stakeholder Specialist click here

Article By:

_{^{Steve Bell
Bell Financial Services
Address :: 136, Loxley Road, Stratford upon Avon,
                Warwickshire, CV37 7DT
Tel :: 01789 551848
advice@bellfinancialservices.co.uk
www.bellfinancialservices.co.uk
Bell Financial Services is an Independent Financial Adviser}}

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_{^{In this case we would strongly recommend that you contact the author Steve Bell who is an expert in this field and whose contact details are provided above.}}

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