Give us all a stake in the cheap and cheerful new pensions

The latest proposals for "cheap and cheerful" stakeholder pensions with no commission fees and a maximum annual management fee of 1 per cent have been welcomed by discount brokers such as Hargreaves Lansdown, which last month launched an early version of a stakeholder pension with annual charges of 0.95 per cent; and by Virgin Direct, which holds down charges by selling personal pensions direct to the public and investing the money in tracker funds, which simply follow the stock market trends.

It has been welcomed by a few insurance companies including Legal & General, which already guarantees that anyone who starts contributing to a pension now will be given "stakeholder" terms without penalty. But most of the industry says a 1 per cent annual fee is not enough to pay for either basic advice or professional management of the funds.

Few financial advisers will want to sell stakeholder pensions if the most they are likely to earn is around pounds 3 a year in commission. So "stakeholders" will only be sold in bulk, through employers, who'll be obliged to offer access to stakeholder pensions if they are not already providing a company scheme, or through affinity groups such as trade unions.

Anyone who can join an occupational pension scheme should still do so to take advantage of the employer's contributions. Anyone else who can afford to invest more than the proposed maximum of pounds 300 a month in a "stakeholder" will still be better off with a personal pension - and the more they earn and the older they are, the greater the advantage because of tax relief on all pension contributions. Anyone who already has a personal pension should keep it going, especially if they have already paid the charges up-front. Anyone thinking of starting a pension should ensure they're being offered a plan that'll match a "stakeholder".

But one issue still to be resolved is whether current rules limiting individuals to an occupational, a personal or a stakeholder pension will be relaxed. If not, stakeholders will only appeal to low earners with no other pension plans. If the Government really wants stakeholder pensions to take off, it will have to allow simultaneous membership of more than one type of scheme. That would make a stakeholder pension an attractive basic investment for everyone in work, while allowing those who can also join an employer's occupational pension, or afford a de luxe personal pension plan, to do so.

Isabel Berwick is away.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific