Stakeholder Pension Advice London

Marco's Blog

Are you looking for truly Independent Financial Advice for Stakeholder Pensions in London? Are you after a Financial Advisor who can help you achieve your retirement goals? Would you prefer to have a trained professional explain how pensions work and how you can benefit from them?

Do you require advice on the underlying investments within a Stakeholder Pension? Would you like to know how to shape your pension investment so that it fits your attitude to risk? Are you looking for an Independent Financial Advisor who really understands economics and how markets function?

We can help! Contacts us for a free consultation and we can advise you on how Stakeholder Pensions can be of benefit to you.

Stakeholder Pensions

Stakeholder Pensions are a great and cost effective way of planning for retirement.

The main attraction of Stakeholder Pensions is the income tax relief. This is a massive help towards building your retirement planning. Within a Stakeholder Pension, investments grow free of Capital Gains Tax which is another large tax benefit.

Like Personal Pension schemes, Stakeholder pensions must provide an income in retirement using a minimum of 75% of the fund. The remaining 25% can be taken as Tax Free Cash.

Benefits can be taken from age 50 (Increasing to 55 in 2010/11) and must be taken by age 75. Income in retirement can be provided via an annuity or income withdrawals from a drawdown facility.

The History of Stakeholder Pensions

Stakeholder Pension Schemes were introduced in the UK by the Labour Party government in 2001 to encourage long term savings in relation to retirement. It seemed a good idea at the time to limit charges on pension schemes and reduce the commissions for Financial Advisors. Low charges were meant to attract the average citizen to investment more for their retirement.

The government also imposed that all businesses with 5 employees or more should set up a Group Stakeholder Plan for their staff if no qualifying pension scheme was in place. The Pension scheme should be advertised to staff but the employer or the employees did not have to contribute.

In reality, if the idea was to help the UK population fund for a better retirement, Stakeholder pensions were a complete failure. The idea that individuals throughout the country would suddenly put lots of their hard earned cash into products they didn't understand just because the government reduced the charges was a flawed argument.

There has to be an advice process with a qualified individual providing proper advice for pension investments. It is important that the client has the opportunity to ask all the questions they need to before taking the plunge. Individuals do not invest in things they do not understand! But, Financial Advice also needs to be paid for and many individuals may not want to or be able to afford fees for Financial Advice.

By reducing the charges and commissions on pension products, Financial Advisors were unable to earn a living by selling regular Stakeholder Pensions unless the contribution was quite high. This cut out the vast majority of the population from receiving Financial Advice for retirement. This is especially relevant as many individuals would prefer to pay for advice by commission. The cost of Financial Advice is spread over time and comes out of the plan, rather than the client having to come up with fees at the outset.

At the time the government and regulator were also imposing much higher regulation for Financial Advisers The result of these new changes was that the amount of regular Pension business carried out by Financial Advisers plummeted and many Life Offices stopped offering pensions at all!

The cost of the paperwork for all Stakeholder Pension providers to have all business designate a Stakeholder Pension was huge. But the take up was minimal, as the employer was typically not qualified or did not wish to take the liability for advising the staff and no one had to contribute. In many cases this was a huge administrative cost for little or no reward.

Competition in the market place and variety of Pensions available fell, but also the amount of new regular pension plans taken up reduced dramatically. Originally the maximum annual charge was 1% of the fund value each year. The government finally accepted it got it wrong and since 2005 the maximum charges have been increased to 1.5% of the fund value for each year until the 10th year and then 1% thereafter.