Jan 31 2006
The pricing of many pension schemes is unsustainable, according to a leading pension provider.
Scottish Life has claimed that other pension providers in the industry need to take heed of its advice by moving to a sustainable pricing model or instead risk serious financial damage.
Basing its claims on a report by Cazalet Consulting, Scottish Life has highlighted the problems that it foresees with the widely used "stakeholder pricing model".
Alasdair Buchanan, head of communications at Scottish Life, said the industry had got itself into serious problems in this regard.
He said: "The stakeholder model only works if policyholders keep their plan going for most of its intended lifetime.
"Yet the charging structure means there will almost always be an incentive for the policy holder and their adviser to switch the plan to another provider before its 'break even' date.
"The inevitable consequence is that the original provider crystallises losses, which can be very significant."
Mr Buchanan added that many IFAs had not yet recognised that stakeholder-style pricing policies are "totally unsustainable" and that they were leaving themselves open financially in the future.
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