UK - Hopes that occupational pension schemes would use stakeholder as replacement for AVCs have been dashed, providers claim.
And they believe one of the key reasons for companies avoiding such a switch is because providing financial advice for such transfers is too complicated. Scottish Equitable pensions development manager Margaret Craig also pointed out that many the earnings profile of many companies did not suit stakeholder.
She added: “If a company has a significant number of people who are earning over £30,000 then stakeholder will not be an option.”
Legal & General, however, believes that the government must do more to boost take-up if it wants stakeholder to succeed. But a discussion paper by L&G’s pensions strategy director Adrian Boulding insists that compelling small businesses to contribute to pensions is not the right solution.
Boulding believes the government should match the first £100 per month saved by workers in a stakeholder pension with a further sum of £50 for the next two years. He said: “We believe that this incentive will make stakeholder pensions an obviously good purchase and kick-start the savings habit for up to three million people. Once these people have taken the first step on the savings ladder, they are far more likely to take the subsequent steps.”
But Hammond Suddards Edge partner Ian Greenstreet believes that eventual compulsion is more likely to push the case of stakeholder. He said: “The government will introduce compulsion, but it is not going to do it this side of the election because it is too politically dangerous. But I predict that we will have a compulsory 3% employer contribution to employers who don’t contribute to occupational schemes.”
By Paul Sanderson and Jonathan Stapleton
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