2 November 2004 - Consultation on new stakeholder pension regulations
Changes to the stakeholder pension are to be consulted on, Pensions Minister, Malcolm Wicks announced today.
Amongst the proposed changes will be the requirement for a customer’s savings to be moved to less volatile investments five years before retirement. Known as “lifestyling”, this change will help provide additional security for customers in the run-up to their retirement.
Malcolm Wicks said:
“We are making these changes so that stakeholder pensions can become part of the new suite of stakeholder products that can be sold through a new basic advice process.
“The key change is that the savings of those people who do not want to make investment choices will be “lifestyled”. “Lifestyling” means that at least five years before retirement, the members’ pension savings will start to be moved into less volatile investments in order to reduce the risk of a sudden drop in value shortly before retirement.
“I am also announcing today that when the new stakeholder pension charge cap comes into effect in April 2005, the cap for existing members will be held at 1%.”
The consultation period will run until 17th December 2004.
Notes for editors
[an error occurred while processing this directive]- The consultation was announced by Malcolm Wicks in a Written Statement to Parliament today.
- Stakeholder Pensions were introduced in April 2001 and to date over 2 million have been sold.
- The Sandler review “Medium and Long-Term Retail Savings in the UK” (July 2002) found there were a number of problems with the long-term savings industry, for example the complexity of products and the opacity of terminology. This made it difficult for lower or middle income consumers to access these products.
The Review suggested that the answer lay in product regulation:
“The Review therefore recommends the introduction of a suite of simple and comprehensible products, the features of which would be sufficiently tightly regulated to ensure that, with certain additional safeguards, these could be purchased safely without full regulated advice.” - In July 2003, the Government announced details of the suite of new “stakeholder” products. The suite will consist of
- A deposit account
- A medium term savings product
- A pension product (this will be the existing stakeholder pension)
- The Child Trust Fund will also be available within the suite of products.
- In June 2004 the Government announced the price caps that will apply to the new stakeholder products. For both the pension and the medium term products the cap will be an annual management charge of 1.5% for the first ten years that the product is held, and thereafter an annual management charge of 1% will apply.
- The stakeholder pension can be sold through the new basic advice process that FSA has been market testing over the last few months. This will help to reduce providers’ costs and, together with the new price cap, will allow them to reach out to a wider market, particularly people on lower or moderate incomes.
- The consultation document is on the Department’s website at www.dwp.gov.uk/publications/dwp/2005/stakeholder_pens/sps_amd_regs.pdf (617KB)
- The Department is aiming to make and lay these regulations in early 2005, to come into force on 6 April 2005.
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