Legal & General has issued a challenge to stakeholder-friendly providers to match the transfer value...
Legal & General has issued a challenge to stakeholder-friendly providers to match the transfer value pound for pound when policyholders opt to switch to stakeholder.
Stakeholder pensions, scheduled to begin in April 2001, have a 1% total charging cap on the product.
However, pre-stakeholder schemes while boasting lower charges than traditional pension products, still have higher charges.
However, most groups offer free transfers to a stakeholder once they are launched.
When the PIA issued its regulatory update 64 last year it stated that a pension sold today, in light of stakeholder pensions, could not materially disadvantage the member. Legal & General's chose to guarantee transferability for all personal pensions sold since March 1999. It calculates the value of the pension against what it would have been if it had originally been a stakeholder scheme.
If the calculation shows the pension has cost the customer more than a stakeholder, it will refund the difference and transfer it, penalty free, to a stakeholder plan.
Adrian Boulding, pension strategy director at L&G, said: "The crucial test of stakeholder friendliness is the issue over material disadvantage on transfer. The key question is: will the amount available for transfer be the same as if the pension had been on stakeholder charges from the outset?"
Boulding said other pre-stakeholders that charge 1% or less are on par with the Legal & General scheme, using a different method, however, are not offering a guarantee.
Other providers are also allowing contributions as low as £20, the minimum regular investment allowed under stakeholder, while Legal & General draw a minimum £30.
Leslie Grey, Scottish Mutual's pensions development director, said its Universal scheme matched Legal & General's offer because it has a flat 1% annual management charge.
He said: "We describe its charging structure as stakeholder shaped and, on current interpretation, it would match any stakeholder scheme."
Margaret Craig, senior technical manager at Standard Life has avoided labelling its products stakeholder friendly, as it believes the titles could be misleading.
Standard Life is launching two pension plans in May which closely reflect the current interpretation of stakeholder rules.
The schemes will be called PP One and GPP One, reflecting its 1% charge.
Prudential is guaranteeing transfer values for all pension contracts issued since 1 January 1999 will have a transfer value of no less than the gross premiums paid if customers want to transfer to a stakeholder.
Scottish Amicable said its new Premier group personal pension will have a charging structure based on the key principles of current stakeholder legislation.
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