Providers should be allowed to impose a "slightly higher" annual charge on stakeholder products in t...
Providers should be allowed to impose a "slightly higher" annual charge on stakeholder products in the first few years, suggests the ABI in response to FSA and Treasury update on proposals for the "Sandler" stakeholder suite.
Initial comments provided by the ABI on stakeholder product reforms indicate insurance firms are so far pleased with the concept of simplified products, providing they actually attract consumers to take them up.
However, mistakes made with stakeholder pensions suggest providers are only likely to develop a widened suite of stakeholder products providing the pricing structure gives them greater leeway for profit-taking than the 1% cap currently imposed on Cat-marked products - such as Isas - or stakeholder pensions.
Alternatively, the Treasury could adopt the existing 'international standard model' which allows a charge on each contribution, along with a 1% annual management charge, says the Association of British Insurers.
Although there is little detail about the specifics of products at this stage, the ABI says keeping such a small range of products is likely to meet the core need of consumers, given that many of the confusions - such as two types of 'stakeholder' pensions and Cat-marking - will be cut back to a single brand, says Mary Francis, director general of the ABI.
"These mass market savings products are now taking shape. We have been particularly pleased to see the Treasury and the FSA working more closely during the design phase, in consultation with financial services companies.
"But the Sandler products are not an end in themselves. We will only succeed if we generate more saving today to meet the spending needs of tomorrow. These products will need to be attractive to consumers and worthwhile for providers to sell. A realistic decision on charges is key to making Sandler's vision a reality."
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