Winners and losers in the stakeholder stakes

'If I were one of Barclay's existing 400,000 pensions customers, I would be slightly miffed'

Zero per cent charges on your pension! They'll be paying you to take one out next.

Zero per cent charges on your pension! They'll be paying you to take one out next.

That was my first reaction this week on reading Barclays' announcement of its stakeholder pension, to be launched next April in line with Government plans for cheap retirement schemes.

As I read on, however, it quickly became clear that a) the zero charge only lasts one year, after which you go back to "normal" charges, and b) yet again, existing customers are going to get a raw deal compared to new ones.

The second criticism might seem a bit harsh, since stakeholder pensions (which are designed to charge no more than 1 per cent in management fees a year) are a totally new product. But if I were one of Barclays' existing 400,000 pensions customers, I would be slightly miffed that I was not also being charged "zero per cent", even if it was just for one year.

Most of the big pensions providers have now announced their plans for stakeholder products, coupled with dramatic cuts in their existing pensions charges. Standard Life declared a fortnight ago that all its 700,000 customers would enter the "one per cent world", as the marketing jargon has it. Norwich Union has also unveiled more modest cuts, while this week the Pru, the biggest player of all, said that everyone would be getting "stakeholder"-scale charges from now on.

The Government has been keen to introduce stakeholder in order to prompt the less well-off to save for old age. Most people are aware that because of demographic changes, the state pension is not going to keep you in beans when most 20- to 40-year-olds retire. Therefore people must take responsibility for their own pensions. By decreeing that stakeholder must not cost more than 1 per cent, the Government hopes that millions of the less well-off will start providing for their retirement.

Certainly the last few weeks' announcements seem to suggest the Government has succeeded in driving down the cost of your pension. But before we congratulate Tony & Co, there are a number of problems outstanding.

As we point out on page 1, banks and insurance companies have responded to cut-throat competition by dangling ever juicier carrots in front of new customers, while frequently leaving existing, loyal customers with the same old duff rate or product.

Banks don't even have to inform customers that new accounts with new rates are being offered, apart from sending you an annual round-up. Either the voluntary bank code should tackle this, or the Government should legislate against it. The same goes for insurance companies launching new low-cost pensions.

There is also the growing problem of red tape, which seems to be part and parcel of New Labour's "project". Businesses with as few as five employees will by law have to provide "access" to stakeholder pensions. I know personally several small businesses that are having to devote a major part of their time solely to dealing with this administrative burden. It might have seemed a good idea at the Treasury to "outsource" stakeholder like this, but it is going to prove a big drag to growing, entrepreneurial businesses.

Separately today, Bradford & Bingley is unveiling details of the letters it will be sending out to all customers on how its demutualisation will work, and how many shares they will get. (See the Business section.) Tantalisingly, however, the building society is not saying how much its shares will be worth when it floats on the stockmarket on 4 December.

John Willcock is Personal Finance Editor of 'The Independent'

j.willcock@independent.co.uk