With stakeholder pensions becoming a statutory workers' right, Suzy Bashford asks why providers aren't pushing their particular products more aggressively
It is not often that new products enter the financial arena. And even less so that they are relevant to the majority of the working population. But stakeholder pensions, which come into force by law on October 8, mark one of those rare moments. However, the arrival of these products has not been accompanied by the level of marketing one might expect.
After October 8, every company in the UK with more than five employees will have to give staff access to a stakeholder scheme or government-approved personal pension, unless they offer an occupational scheme or other type of approved pension.
With almost 76% of UK workers employed by such companies, the law has the potential to affect more than 16.4 million people and about 400,000 companies.
Stakeholder pensions come as the government's response to fears stoked by the media that people will be poverty-stricken when they reach retirement age.
"Stakeholder pensions are a way for people to provide for themselves," says Malcolm Lyons, director of independent financial adviser company Music Media IFA.
But for many consumers, pension is still a dirty word following the misselling scandals of the late-80s and 90s, when people were incorrectly advised by agents tied to pushing particular products to opt out of company pension schemes.
Because of this negative feeling, the government must now convince people that it is a good idea to set money aside for their future.
To persuade them that they won't lose out this time, it is keen to emphasise the benefits of stakeholder pensions.
They are flexible -- you can start, stop, increase or decrease monthly payments without penalty -- and they are cheap, as the government has capped the charge providers can make at 1% of the value of the fund per year. And the minimum investment is only [pound]20 a month, so they do not discriminate against the lower-paid.
So with all these benefits to shout about, the lack of marketing surrounding stakeholder pensions is perhaps a little surprising.
As Ben Dansie, managing director of business communications agency Omobono, says: "Stakeholder is a new opportunity. You would have thought financial services companies would be clued up and ready."
The problem with marketing stakeholder pensions is that, because the government has largely set down the rules, there is very little to differentiate one provider's offer from another.
Added to this, the margins on stakeholder pensions are very low compared with other products and in order to make a profit, volume of customers is key. And building volume will not be easy due to the sheer number of providers in the market.
While the industry awaits a period of consolidation, there are currently about 47 providers keen to offer stakeholder pensions.
Lyons says there are only two differentiators between these offerings: fund performance and marketing style.
But while marketing could play an important role in the battle for market share, there is currently hardly any consumer advertising that flags up stakeholder pensions.
Indeed, Norwich Union is one of the few brands that is pushing the stakeholder product in its consumer ads, handing a [pound]7m brief to McCannErickson, as it hopes to grab a 20% market share in two years.
"There is no point talking about charges," says Fiona Martin, head of brand and advertising at Norwich Union. "We are trying to say in a clear way that everyone needs a pension and that stakeholder could be the right choice."
Norwich Union's TV and outdoor campaign features a range of people in various jobs, urging them to sort out their pensions arrangements. It's a soft-sell approach with a hint of humour, with straplines such as 'If you're a chef, prepare yourself' and 'If you're a waiter, don't wait'. …