Stakeholder pension growth revealed in new study

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Written by Ray Clancy

Tuesday, 21 September 2010 09:18

Investors in stakeholder pensions have seen annualised growth of 4.38% since their launch in April 2001 with £10,800 in contributions currently worth around £13,994, according to a new analysis.

The scheme, launched to encourage long term saving for retirement has attracted contributions of up to £20.75 billion with around 1.86 million people investing, according to HMRC figures.

Now a study from MetLife Europe Limited estimates the current value of the total contributions to stakeholder schemes is £26.5 billion with savers benefiting from tax relief as well from making regular contributions throughout stock market cycles.

Someone investing £100 a month in a standard FTSE-linked stakeholder scheme from launch would now have a total fund of £13,994, MetLife estimates.

However volatility during the period since the scheme was introduced has meant investors have suffered negative returns in four of the nine years since its launch, with the worst annual falls including a 36.1% drop in the FTSE-100 between March 2008 and 2009, and a 31.5% drop in the 2002/03 period.

The analysis comes as the Coalition Government takes a long, hard look at the planned National Employment Savings Trust scheme which is seen as a potential replacement for stakeholder schemes.

MetLife believes guarantees on capital and income could have a key role to play in encouraging retirement saving as well as potentially producing stronger returns.

‘Stakeholder pensions have been a qualified success and have encouraged people to save for their retirement with more than £20 billion invested in them,’ said Dominic Grinstead, managing director at MetLife’s UK Branch.

‘They have built an infrastructure for workplace pensions and could be adapted and expanded along with a commitment to auto-enrolment. However strong returns on investment are clearly a further encouragement to saving for retirement and guarantees may have a role to play in that,’ he added.

Analysis shows the total number of members in stakeholder schemes has declined from a peak of 1.88 million in 2007/08 to the current level of around 1.86 million. MetLife, which pioneered unit-linked guarantees with its award winning Retirement Portfolio, offers income, deferred income and capital guarantees plus guaranteed death benefits across its product range, with the option to lock-in up to 10% growth annually or unlimited growth every two and a half years.

MetLife is an affiliate of US-based MetLife, Incorporates, a leading global insurance and financial services organisation which counts the US’s largest life insurer among its subsidiaries. The organisation is renowned for its stability, financial strength and security, and had approximately £363.8 billion (US$ 573.9 billion) of total assets as of June 30 , 2010.