AN IMMEDIATE review of stakeholder regulations is needed to ensure a level playing field for providers by allowing them to adopt similar charging structures to that unveiled by Nest, says Friends Provident.
The pensions provider argues the proposed Nest charging structure is inconsistent with the stakeholder pricing structure which has effectively meant providers have been unable to take any contribution charges since the launch of stakeholder 10 years ago, leading to long payback periods. Friends Provident says the 0.3 per cent AMC charge initially proposed when personal accounts were first considered would have meant
generous subsidies for Nest from the government, so welcomes the introduction of contribution charges as it means Nest will now be competing on a fair basis with the existing market place. The provider says the 2 per cent contribution charge will continue for a substantial period given the timeframe over which the contributions and funds build up.
Martin Palmer, head of pensions marketing at Friends Provident says: “It is telling that when the government has to fund the large development outlay for Nest, they have come to the conclusion that a contribution charge is required to reduce payback periods. It is disappointing that it has taken the government 10 years to come to this conclusion. It is crucial the government is open about how long this contribution charge will last, and the assumptions behind this. It is important that people understand this before they start contributing to Nest – in the same way that providers have to fully disclose all their charges up front.”
John Lawson, head of pensions policy at Standard Life says: “There is no way you can compare the charges on Nest with those of a single AMC product because there will be some people who will be better off and some who will be worse. You may see existing commission-paying
insurers moving in this direction prior to 2012.”
Mark Futcher, associate at Barnett Waddingham says: “Back to the Future on charging structures and a move away from clear and simple stakeholder guidelines that have been promoted so heavily by the Government since 2001.”