Scottish Mutual estimates the 1% annual charge on stakeholder will prove more expensive to many long...
Scottish Mutual estimates the 1% annual charge on stakeholder will prove more expensive to many long term investors than a traditional front end loaded scheme.
Assuming a 7% growth rate in the fund, the life office says younger investors could pay up to 15% more in charges by taking the stakeholder route.
Leslie Grey, Scottish Mutual's pensions development director, said: "A person in their mid-20s might be better off investing in other pension products, as stakeholder's flat fees can mean greater charges."
Grey said the rounded off figures indicated front-loaded policies would generally take around 15% of fund value after 25 years, 20% for 30 years and 25% for 35 years. The figures assumed advisors received maximum commission of up to two-thirds the first year's premiums.
Assuming firms stuck to stakeholder's flat maximum of a 1% charge, policyholders would see 22% of the fund going in charges after 25 years, 30% after 30 and 40% after 35 years.
Grey said many pension schemes have loyalty bonuses and reduced annual charges for long-term clients, effectively reducing annual fees.
Despite improved risk appetite
FOS award limit increase
Relates to 136 million transaction reports
Ceremony will take place 13 November