Pensions Investigated: How a stakeholder scandal could still be averted

While the sins of the regulators may largely result from a faulty Thatcherite concept of self-regulation, the quixotic proposal of stakeholder pensions is Blairite. This idea will really be "extravagantly romantic" if a wide variety of organisations, including employers, trade unions, retailers or any affinity groups are to offer new pension plans.

Will many of such organisations understand what they are up to? How will the new plans dovetail with the existing pension options? Will the result be bureaucratic and regulatory nightmares?

The better way ahead would be to build on the good features of the present pension plans and to oblige other providers to come into line with them. There are already low-charge and good-value products offered by several providers, including Equitable Life, a range of direct sellers like Virgin, Marks & Spencer, Direct Line, Eagle Star, Merchant Investors and Legal & General, high street names like Alliance & Leicester, Nationwide and some traditional pension companies dealing with financially strong IFAs who are willing to take lower commissions.

The regulators must now tell the other providers that they have also to offer plans with charges and flexibility in line with benchmark plans or their equivalent. Otherwise there should be no tax relief forthcoming on their particular products.

With such a scenario all the plans on offer would be good value. No planholders would face automatic losses or poor returns. Planholders could be saved pounds 400m a year. Exchequer funding through tax reliefs would no longer be supporting poor products and practices.

All that would remain to create fully portable plans would be to require employers to contribute to the new plans as they do with occupational schemes. The essentials of stakeholder plans would also be delivered. There would be no mis-selling, as you cannot mis-sell a good product.

- John Chapman