UK – The UK government has raised the charges on stakeholder pension to 1.5% for the first 10 years and said other, proposed low-cost savings products would have a similar maximum rate.

The change followed intense lobbying by the providers that the previous 1% maximum charge was unprofitable for the existing pension and the planned ‘Sandler’ medium-term share-based investment product.

Companies from April 2005 will be able to charge 1.5% on stakeholder pensions for the first 10 years for new customers. The pensions were introduced in 2001 but the government said it would debate whether existing customers could also be charged this amount.

Providers and the trade bodies’ reactions were mixed. Prudential said it would return to selling individuals the stakeholder pensions, after changing strategy to target the employers, and would sell the Sandler products.

And Nigel Chambers, director of Alexander Forbes Financial Services, said: “The government’s announcement will significantly increase the number of people to whom advisers, such as ourselves, can afford to provide one-to-one advice.”

but Standard Life said the new rate was still not enough to cover the costs of selling the products, although the regulator said the time needed could be reduced from several hours for existing products to 40 minutes, thereby cutting costs.

Malcolm Tarling, spokesman at the Association of British Insurers, said gave a cautious welcome to the change. He said: “It is a move in the right direction and gives the right signal that the government is prepared to listen.”

The Trades Union Congress and Consumers’ Association, however, which opposed the change, said the charge increase would mean they paid an extra 11% per month. There have been 1.9m stakeholder pensions sold, although sales have been declining in the last 12 months.

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