The success of personal accounts depends on learning from the mistakes of stakeholder as almost 90% of advisers do not recommend stakeholder pensions, says Skandia.
In the Queen’s Speech yesterday it was announced a Pensions Bill will be published shortly, which is likely to include a delivery authority to help setting up the proposed personal accounts system, but Skandia says if personal accounts are to work the industry should learn from the mistakes of stakeholder.
The insurer, which carried out a survey of 484 advisers, says with 86% of advisers either not willing to recommend stakeholder pensions, or planning to reduce the number of stakeholder recommendations they make, the industry has to learn from this experience to make sure personal accounts are not in a similar position in five years time.
Skandia says the survey reveals instead of stakeholder pensions, advisers and clients are increasingly demanding more investment choice and flexibility, and points out the fact there is a need for personal accounts is “an admission that stakeholder pensions have failed to fill the retirement savings gap”.
Nick Bladen, pensions marketing manager at Skandia, says there were some “fundamental flaws behind stakeholder pensions”, including an “inappropriate” distribution model, while the restrictions placed on stakeholder made them “throttle competition and innovation”.
As a result he says consumers had less choice rather than more, leading to a growing demand for pensions offering more investment flexibility, with the survey showing 78% of advisers are recommending multi-manager personal pensions, with 70% of those not already doing so, saying they will reconsider their position over the next year.
Bladen points out there still remains a huge savings gap when it comes to provision for retirement, and while the measures being taken to address this are a positive step, he warns lessons need to be learnt from the "failed route" of stakeholder pensions.
He adds: “With such restrictions on investment choice, it is clear stakeholder pensions are falling out of what little favour they ever had with advisers. Given the feedback we have had on stakeholder, we continue to hold our view low-cost pension models can and should sit alongside the advised market, rather than try to replace it. Advice remains at the heart of future success in the UK pensions market.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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