The introduction of the stakeholder pension has created a wider “stakeholder effect” in the pensions market, according to a new report published on Friday by the Association of British Insurers (ABI).
“Stakeholder Pensions – The Story So Far” includes case studies showing how the scheme has benefited employees and reports that sales of individual pensions rose by 50% in the three months after stakeholders were introduced. Many of these new sales were group personal pensions (GPPs), generally written on the same terms as stakeholder pensions. Employers have also widened the eligibility criteria for their GPP and occupational pensions as a direct result of the introduction of the new scheme.
Stephen Sklaroff, ABI’s Deputy Director General, said, “The introduction of the stakeholder pension, together with the wider “stakeholder effect” is good news.
“As a nation we need to save more towards retirement. Recent research for the ABI calculated that the “savings gap” now totals £27 billion a year. Very worryingly, some of us save nothing at all. Stakeholder makes a good start in encouraging people to save. But more must be done. We believe financial advice is the key, and, if regulation can be made less costly and cumbersome, that advice will become more widely available – especially for those on lower incomes.”
The report also includes latest sales figures for stakeholder. These show that, during August, 64,000 new pensions were set up, with 25,000 more employers signing up as providers. Monday 8 October is the deadline for eligible employers to have designated a scheme.
Commenting, Stephen Sklaroff said, “Many providers are reporting a last-minute rush of employers signing up for stakeholder. No-one knows precisely what the target figure is, but best estimates put it at somewhere between 300,000 and 350,000. It’s unlikely that all of them will sign up by the deadline, but the figures so far look promising and as many as two-thirds may have done so by the deadline. We hope the rest will follow as soon as possible.”Research by Standard Life reveals that about 100,000 firms have still to put a stakeholder scheme in place. An estimated 500,000 businesses are required to set up a plan.
David Willetts, shadow secretary of state for work and pensions has called on the government to give companies an extra six months to comply.
He warns that unless the rules are relaxed up to 200,000 companies face a collective fine that in theory could reach a staggering £10 billion for failing to meet the deadline. (Each firm could face upto a £50,000 fine)
However, despite the fine the government will have a hard time tracking down businesses that refuse to comply. The Occupational Pensions Regulatory Authority (OPRA) is tasked with policing the new pensions including taking action against those firms failing to meet the deadline. The regulator has admitted that it does not have the resources to seek out firms that are breaking the law. But it has called on employees to blow the whistle if their firm is dragging its feet.