UK - The government must lift the 1% cap on stakeholder pensions if it makes "lifestyling" mandatory for default funds, industry leaders warn.
The Association of British Insurers claims the move will increase costs substantially and a “realistic decision” on charges is key to making Ron Sandler’s review on savings a reality.
Director general Mary Francis said: “The Sandler products will need to be attractive to consumers and worthwhile for providers to sell.”
Association of IFA public affairs director Tracey Mullins agreed. “The government wants low-cost stakeholder products for the low paid, but a 1% charge is not enough incentive to sell the products.
“It’s time the government raised the cap – 1.5% would be a step forward.”
The Treasury said the level of the price cap would be set later this year when the Financial Services Authority’s market research into the sales process is completed.
Clerical Medical industry affairs manager Stewart Mason explained that the measure to make lifestyling mandatory would be another burden on product providers and IFAs.
“To go from one default fund to another, the individual will need advice and there will be a substantial cost involved that providers will have to meet.”
Product providers and IFAs have long complained that 1% stakeholder charges do not provide enough incentive to sell stakeholder and make a reasonable profit.
The abolition of the 1% stakeholder cap is likely to result in higher front-end charges.
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