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IFA Promotion Stakeholder Update - Issue 7

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Contents

• Introduction
• Comment from David Elms, Chief Executive of IFA Promotion
• Research findings
• Stakeholder news
• Stakeholder win list
• OPRA-registered Stakeholder pension scheme providers
• Publications/ guides
• Stakeholder technology

Introduction

Welcome to the seventh edition of the IFA Promotion Stakeholder Update, produced exclusively for journalists. We will produce other updates when there is new information available, ensuring we keep the information relevant, to the point and interesting. For further information, for back copies or to remove your name from the distribution list, please contact Pippa Russell or Shellie Wells on 020 7490 8828 or email PHILIPPAR@LANSONS.CO.UK.

David Elm's Stakeholder Comments

What a time for pension news! With only a matter of weeks to go before the October 8th deadline Stakeholder is very much in the public eye. With debates continuing about how commission should be paid on Stakeholder contracts, and product providers expressing their concern about the volume of administration needed to put schemes in place, IFAs find themselves once again caught in the middle.

Irrespective of Stakeholder developments, it is clear common sense that those people who do not want to be in the hands of the state at retirement should seek out an IFA who can advise them on all their pension choices.

Research findings

Issued by	Findings
Abbey National	- 25% of employers who have designated a Stakeholder provider are contributing - Employee take up rate is 20% where there is no employer contribution and 60 - 70% where the employer is contributing
AXA Sun Life	- A third of the UK public has made no financial provision for their retirement and only 6% are saving more than 200 a month
Bacon & Woodrow	- Half of those companies surveyed which did not have to designate a Stakeholder plan had avoided it by amending the eligibility requirements in their existing scheme
IDS Pension Service	- Employers pension contributions rose by 16% last year, four times the increase in average earnings over the same period - The average normal contribution rate was 6.6%, a 9% rise over the previous year
Financial Services Forum - Survey of its membership base	- E-commerce was not suggested as a major channel for Stakeholder delivery - Those surveyed believe Stakeholder will be sold in a face-to-face environment with IFAs as the main distributor, Banks and buildings societies ranked second and tied agents third - Survey of potential provider companies: - More than half confirmed that they would be offering Stakeholder but they do not foresee it being a massive area of marketing investment. - Of those currently offering Stakeholder none were prepared to spend more than 25% of the marketing budget on promotion - Most spending is less than 10%
IFA Promotion	- The public's awareness of Stakeholder has risen to 54% - up from 39% in February - 59% heard about Stakeholder through the press. - 52% of respondents find stakeholders confusing, an increase of 10% on February's figures. - 61% would take advice from an IFA before taking out a stakeholder compared to 51% going to their employer. - 22% of those contributing to a pension don't know if it's a stakeholder or not.
JP Morgan Fleming	The survey predicts that: - 12.6m workers are expected to face financial hardship in retirement compared to 13.3m last year - a drop of about 3% - about half a million more people should be able to live comfortably in retirement than in 2000 - In 2001 women outstripped men in terms of pension provision - 3m more people facing financial difficulties or poverty in retirement than six years ago - Over the same period, the number of people likely to enjoy a comfortable retirement has dropped by about 10% - Just over half of all working men and women now face financial difficulties or poverty in retirement with the worst affected groups including the self-employed (68% compared to 54% in 1996) and the over 50s (2.1m likely to be financially stretched compared to 1.2m in 1996)
Key Note	- One in a hundred on low income intends to take out a Stakeholder pension
Marks & Spencer Financial Services Stakeholder Barometer	- Employers offering access to pension provision up to 69% - 54% of SMEs with fewer than 20 employees have yet to make a pension available - 55% of SMEs know only a little about pension changes and 5% know nothing at all - Among those companies that already have pension provision, GPPs are the most popular at 29% followed by a Stakeholder GPP at 24% - 3 in 5 employers with a GPP in place believed it to be Stakeholder friendly - 50% of employers claimed to know a great deal about the changes in legislation surrounding Stakeholder
Prudential - commissioned report by Professor David Storey of Warwick Business School	- 71% of business with 5 or more staff currently offer no form of pension scheme - The businesses with the most work to do on Stakeholder regulation are hotels, restaurants and engineering companies. Whilst the least affected will be transport, communications and construction companies.
The Association of British Insurers (ABI) - sample 952 people	- 14% of adults are likely or quite likely to take out a Stakeholder in the next 12 months and 85% said they planned to take some advice - 51% would consider going to an IFA and just 22% would consult an FSA decision tree. - Of those who say they are unlikely to take out a Stakeholder almost 40% say they'd be more likely to if it was arranged through their employer and this would rise to 50% if their employer were prepared to contribute - Awareness of Stakeholder pensions is lowest amongst lower income groups with 1 in 10 stating that they couldn't afford a Stakeholder - Research indicates that up to 500,000 on moderate incomes will take out a Stakeholder before April 2002.
Virgin Direct	- 50,000 UK companies could miss the 8 October deadline and the Government could collect 2.5bn in fines - Nearly 9 out of 10 Stakeholder eligible firms are aware that they need to have a scheme in place by October, but less than half have set up a scheme - Two thirds of firms have yet to consult staff over the choice of Stakeholder scheme and 52% have only got as far as requesting literature - Of those that have taken action 41% have had an initial meeting with a pension company whilst 42% have set up a scheme and nearly all plan to make contributions to staff pensions, usually 5% of salary - SMEs are the worst prepared for Stakeholder with only 29% employing between 5 and 10 already have a scheme in place and 22% are planning to leave it to the last minute

Stakeholder news

• According to the Association of British Insurers (ABI), returns from the registered Stakeholder providers show that at least 88,394 employers of the 400,000 targeted had designated a scheme by the end of June, with 224,506 employees making their own contributions. However, many of these schemes are empty, and there are still 312,000 employers who have not designated a scheme. Of the 224,506 live Stakeholder plans, 175,000 of these are conversions from existing schemes.
• All requests for an extension of the 8th October Stakeholder deadline have been refused, despite growing concerns. OPRA has said that if an employer has made all attempts to be Stakeholder compliant and misses the deadline through no fault of his or her own, they will be lenient.
• There has been criticism, from the likes of CGNU, of the government's handling of the promotion of Stakeholder pensions and the danger of missing its original target audience of low to middle income earners on a salary between 8,000 and 20,000 a year.
• The Department of Work and Pensions (DWP) is to mailshot 400,000 of Britain's businesses in a bid to get them to introduce Stakeholder. The letters, costing over 100,000, will concentrate on how to designate a Stakeholder provider. DWP research shows that 94% of the targeted firms are aware of Stakeholder. There will also be further consumer publicity later in the year to raise awareness, with the relaunch of the government's TV-based sheep dog campaign.
• Standard Life has sold 10,500 individual policies since April and it is experiencing strong interest in Stakeholder, with 5,000-6,000 requests for quotes per week.
• Clerical Medical has sold 4,000 policies, 1,000 individual and 3,000 group in which investors joined through a company designated scheme. It also has 300 empty schemes, where Clerical has been designated as the Stakeholder provider but the employer had yet to approach the employees.
• 20,000 schemes have appointed Legal & General as a Stakeholder provider. L&G said 84% of its new pension business had been on Stakeholder terms, but described take-up by individuals as relatively slow.
• Prudential says it has registered more than 9,000 small business for Stakeholder pensions, offering 340,000 employees access to Stakeholder, but just 500 are contributing to plans.
• WHICH? Magazine, published by the Consumers' Association, has selected its seven best Stakeholder pensions out of the 34 Stakeholder pensions it assessed, according to fund choice, access to advice and easy of purchase. Which? recommended AXA Sun Life, Friends Provident, Legal & General, Norwich Union, Scottish Amicable, Scottish Widows and Standard Life.

Stakeholder win list

It is interesting to see that a number of provider companies are reluctant to announce their Stakeholder take-up figures and total Stakeholder sales, making it hard to gauge the success of Stakeholder to date. If you are aware of large 'wins' missing from this list, please e-mail Kim North at kim@prettygroup.com with details.

Provider	Providing Stakeholder scheme for	Potential number of members
Abbey National	WH Smith - will offer the scheme as a pension and AVC	8,000 staff
	Ottakar plc (book retailer)	1,000 staff in its 76 bookstores in England, Scotland and Wales
AXA Sun Life	Association of British Travel Agents	2,500 member firms with approximately 100,000 employees
	AXA to administer Bank of Scotland's Stakeholder. Initially offered to bank's business customers and eventually available through branches to private clients.	Approx. 4,000 employers
	National Australia Group in the UK to distribute Stakeholder pensions to it's member - customers of Clydesdale Bank, Yorkshire Bank and Northern Bank
Building & Civil Engineering Insurance	B&CE has taken more than 60% of the Stakeholder market	Sold 137,413 to the construction industry
Clerical Medical	Northumbrian Water Group
Friends Provident	The Heating and Ventilating Contractors' Association and Electrical Contractors Association
	Amalgamated Engineering and Electrical Union (AEEU)
	National Council for Voluntary Organisations (NVCO)	27,000 charities with paid employees
	National Federation of Fish Friers (NFFF)	2,000 employer with 10,000 staff
HSBC	WM Morrison Supermarkets	40,000 employees
	British Shops and Stores Association (BSSA)	3,200 members totalling 60,000 employees
	Restaurant Association	3,000 members
Invesco	McDonalds Restaurants (Watson Wyatt acted as consultants in the selection of the scheme)
Legal & General	The Printing Industry Pension Scheme (PIPS) - Graphical, Paper & Media Union (GPMU) and British Printing Industries Federation (BPIF)	All employed/ self-employed in the printing industry 200,000 employees
	Professional Affinity Group Services	300,000 members in professional bodies such as the BMA
	Computer Services and Software Association (CSSA)	250,000 members
	National Hairdressers' Association (Hairdressing Industry Pension Scheme)	150,000 - hairdressing employers including self-employed and employees of hairdressing salons
	Recruitment and Employment Confederation	967,000 temporary contract workers and 72,000 full time workers in the recruitment industry
	Forum of Private Business	25,000 members with 350,000 employees
	Stock Exchange Centralised Pension Fund	400 companies in securities industry
	Powergen	250,000 Powergen customers and 7,000 employees
	Association of Optometrists	6,500 members
	Spring Group PLC	2,700 employees
	Barclays to distribute L&G pension & investment products	A possible 250,000 employers
	Alliance & Leicester to sell L&G savings & insurance products to their customers.
	Confetti.co.uk (wedding specialist company)
	Association of Chartered Certified Accountants (ACCA) through Blackmore Financial Services	10,000 ACCA members plus employees of companies where the firm's accountant is an ACCA member
	British Franchise Association	100,000 members
	PR Industry	12,000 members
	Royal Institute of British Architects (RIBA)	150 employees of RIBA, plus an affinity scheme for RIBA's 18,000 individual members in the UK
	St James's Place Capital has begun selling L&G Stakeholder pensions
	Ornamental Aquatic Trade Association (OATA)	600 members
Marks & Spencer	British Healthcare Trade Association	340 member companies representing 17,000 employees
	Radio Electrical and Television Retailers Association	1,500 member companies covering 4,000 retail outlets
	Institute of Export
Merrill Lynch Investment Managers	Marconi, Reckitt Benckiser, Sita, Stena and WPA
	Chubb, Carillion and the Occupational Pensions Advisory Service (OPAS)
Norwich Union	Musicians Union	33,000 members
	Carphone Warehouse Group scheme	3,500 employees
	Broadcasting Union BECTU	33,000 members
	National Union of Journalists	34,000 members, 20,000 employed full time
	Nurture (for charities and 'not for profit' organisations)	1,000 employers employing 750,000 people
Prudential	TUC with affiliated trade unions, UNISON, transport union T&G, general union GMB, retail workers in USDAW, post and telecoms union CWU etc. Plus 15 UK teaching associations have set up the Teachers' National Stakeholder pension scheme under the TUC scheme. The Engineering Construction Industry Association (ECIA) has chosen the Trade Union Congress' Prudential Stakeholder scheme	3 million members     35,000 schools and colleges in England and Wales
	British Chamber of Commerce	126,000 firms
Pearl Assurance	Association of Convenience Stores	25,000 employers
Royal London	JJB Sports	430 stores nation-wide - 11,000 employees across the UK
Royal & Sun Alliance	Pre School Learning Alliance Group	16,000 members pre-schools, playgrounds and nurseries
Schroders	P&O logistics and transport company
	Caparo engineering company
	MacIntyre Care residential care and day services provider
	Bradford & Bingley	2750 employees not already members of the existing pension scheme and new employees.
Scottish Equitable	The Association of Independent Music (AIM)
	The Imperial Tobacco pension fund in the UK	2400 employees
	Manpower	45,000 field and 1,200 operations staff
Scottish Widows	National Pharmaceutical Association (NPA)	60,000 members
	Ministry of defence	200,000 regular personnel and 50,000 reservists within the armed forces
	British Dental Association	11,000 association members with over 35,000 employees throughout the UK
	Killick & Co	37,000 clients
	The Engineering Construction Industry Association - With compulsory employer contributions	300 member companies with more than 50,000 employees throughout the UK
	Retail Motor Industry (RMI) Federation	Available to all member companies totalling approx. 10,500 with more than 1 million employees throughout the retail and manufacturing sectors in the UK
Standard Life	Stakeholder available to general public at up to 18,000 Post Office branches.	Approx 28 million regular post office customers
	The National Association of Volunteer Bureau

OPRA Registered Stakeholder Pension Scheme Providers

Currently 48 schemes are on the OPRA stakeholder register:

Abbey National
AIG Life
Allied Dunbar Group Stakeholder Pension
Allied Dunbar Stakeholder Pension
AXA
B&CE EasyBuild
Bank of Scotland
Britannic
Canada Life
Chamber
CIS
Clerical Medical
Deutsche Asset Management
Eagle Star Group
Friends Provident
FPS
Halifax Life
HSBC Life
Invesco
Legal & General
Marks & Spencer
Merrill Lynch
Nationwide
Natwest Life
NFU Mutual
Norwich Union
NPI
Pearl
Police Mutual
Prudential
Royal & Sun Alliance
Royal Liver
Royal London
Royal Scottish Assurance
Schroder Pensions
Scottish Amicable
Scottish Equitable
Scottish Life
Scottish Mutual
Scottish Widows
Standard Life
Teachers
Teams
TUC
Virgin
Wesleyan
Winterthur Life Stakeholder
Winterthur Life Trust Based Stakeholder

Publications/Guides

• Clerical Medical has set up a Stakeholder information website with the Confederation of British Industry www.clericalmedical.co.uk/stakeholder.
• IS4profit (Internet-based resource for SMEs) has published a guide available at www.is4profit.com for small businesses on the requirements of Stakeholder pension legislation. The guide also includes links to regulators and providers.
• Hammond Suddards Edge have written a high level study of Stakeholder law (detailed description of the legal and regulatory requirements) aimed at life insurance technical staff, pensions lawyers and IFA network groups. The report is published by Sweet & Maxwell priced 150.
• Chartwell Investment Management has recently published a Stakeholder Pension Guide which features a breakdown of funds and names their top 3 Stakeholder providers - Norwich Union, NPI and Standard Life - 01225 446556 or www.chartwellinvestment.co.uk.

Stakeholder technology

• Prudential has formed a Stakeholder pensions partnership with payroll software provider SAGE to gain easier access to SMEs and both companies hoping to steal significant market share in this sector, with a huge marketing campaign of their Stakeholder solutions for the SMEs.
• The Independent Stakeholder Company (TISCO) has developed a new database driven system for IFAs, which it claims, will dramatically speed up the current rate of compliance processing.
• pensionsbusiness (an online provider of a selection of stakeholder contracts for employers) is to offer a 50% commission sharing deal to IFAs.
• According to the software consultants, Corillian, 1 in 4 people will prefer to buy their financial products online within a decade. Stakeholder pensions were the least popular financial product bought online with only 2% of those surveyed having bought a Stakeholder pension online.