National Mutual will not be offering stakeholder pensions from the April 2001 as it believes much of...
National Mutual will not be offering stakeholder pensions from the April 2001 as it believes much of the business written will never deliver any profit.
Gavin Hill, managing director at the group, said the company would be offering products that it expected to perform better than stakeholder. He admitted National Mutual was not a mass market company and did not believe it would be in members best interests to compete for market share in the stakeholder arena.
"We have decided we're not prepared to lose the amount of money required to enter the stakeholder market because it is a route paved with more risks than opportunities," he said.
Hill said success would only come about in stakeholder by gaining a huge market share and companies entering the market would be doing so in the belief that profits post-2010 would more than make up for the earlier losses.
He added: "The stakeholder product is fraught with danger for life offices and it is already accepted that the business will take many years to develop but it is less accepted that the option to free transfer means persistency will be no better and might be a lot worse than current personal pension experience."
Hill believes providers could be forced into a no-win situation if advisers came under pressure to move a fund to a lower charging environment once a reasonable sum had been accumulated.
"Providers will have to choose between losing the business on which they have already made a loss or cutting their charges in the hope even finer margins will eventually produce a profit," he said.
National Mutual will be aligning its business to make complex products such as drawdown and self-invested vehicles, which it feels is a market that will continue to expand. The group will also continue to promote its personal pensions although Hill expressed concern that existing personal pension holders might lose out by transferring to stakeholder.
"The general publicity is that stakeholder will be cheap but existing clients will need to analyse the pros and cons more closely. They could lose with profits guarantees, their pension term assurance and waiver cover," he said.
National Mutual's announcement comes two weeks after firms began to submit their applications to Opra for registration. AMP's stable of financials was one of the first to be officially registered after submitting its application on 2 October.
By 18 October, 26 companies had applied for registration to Opra. The first four life companies to get their applications in, according to the pensions authority, were Norwich Union, Royal & SunAlliance, NatWest Life, and Britannic.
Industry Voice: Scottish Widows pension expert Robert Cochran and economist Andrew Scott discuss the future of employment and income, in episode three of Scottish Widows' podcast series.
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