Stakeholder pensions could be approaching ‘obsolescence’
Sales of stakeholder pensions have fallen by 28 per cent in the last year, prompting speculation that the schemes are nearing the end of their usefulness.
Stakeholder pensions were introduced by the government as a way of encouraging more people to save for their retirements.
However, figures from the Association of British Insurers (ABI) have revealed that sales of the schemes plunged by over a quarter in the past 12 months.
To the end of June 2009, some 600,640 stakeholder pensions were sold, a drop of 28 per cent compared with the same period a year ago. The amount invested in the schemes also fell, down by 22 per cent to £995 million.
One reason put forward to explain the collapse in sales is that the economic downturn has made it more difficult for people to save. While those who are putting money away for their retirements are looking at products such as ISAs that do not lock up their funds in the way that pensions do.
Firms with five or more employees are obliged to provide staff with stakeholder pensions if there are no other retirement schemes available to them.
But employers, too, have been turning to alternative schemes; group personal pension schemes have seen a 10 per cent increase in sales during the past year.
Ian Naismith, head of pensions market development at Scottish Widows, said: “Stakeholder pensions have done a really good job in bringing confidence back and giving a lot of people access to pensions they wouldn’t have had otherwise through their employer. But perhaps they’re coming towards the end of their shelf life.”