INCREASING numbers of providers are expected to follow Norwich Union in giving stakeholder pension investors just limited advice.

Norwich Union said that, from today, investors in stakeholder pensions with capped charges will get just "basic" advice while others get "full service".

Despite the charge cap being raised from 1.0 per cent to 1.5 per cent from April 2005, Norwich Union "does not see this new charging structure as being sufficient."

Pensions and investments senior consultant Darren Coughlan of Westbourne-based IFA Atkins Bland said: "Stake-holder has been a complete failure. Unless someone is investing on a purely cost basis, we would not recommend a stakeholder pension.

"A lot of people (providers) have already pulled out of the stakeholder market because of the pricing structure. We would expect others (still remaining) to come out with similar statements (to Norwich Union)."

Norwich Union sales and marketing director Peter Hales said: "While the new stakeholder pension cap should support the basic advice process, it will not be sufficient to fund full advice for lower premium business."

Norwich Union's statement last Friday coincided with the government's admission of errors in the calculation of tax relief paid on pensions contributions. It has emerged that the inaccurate estimates could amount to £20 billion.

Just weeks ago the government also admitted that nearly half of all private occupational pension schemes are failing their minimum funding requirements.

Britain's pensions crisis is deepening, fuelled by an ageing population and the refusal of high-spending consumers to face up to their responsibilities and save for old age.

But many companies are actively trying to dissuade workers from joining company pension schemes, revealed a report last week from the Pensions Institute at City University, London.

SMEs often imposed high contributions, offered poor information and held meetings outside working hours - all to deter take-up.

Some firms, which employ workers on low-to-average incomes, fear they could be vulnerable to future mis-selling claims if they actively market their pension schemes - the reason being that workers who put money into an occupational pension may miss out on the means-tested Pension Credit.

Pension Credit is a top-up pension, which guarantees pensioners a minimum income of £105.45 if they are single and £160.95 for couples.

Former Prudential chairman Sir Peter Davis described the situation as "startlingly bad".

There was "little or no interest in pensions among the small businesses we spoke to," he said.

First published: Oct 4