Written by Karen Bryan
I’ve been aware for some time that the annual growth rate of 7% used to illustrate the projected value of my stakeholder pension at retiral was far too optimistic. One year the value of my fund dropped, even though I’d paid into it. Now, it would take a mighty big increase in subsequent years to get that supposed 7% annual growth back on track. I started my stakeholder pension in 1999 and I’ve not even seen a 5% annual return.
However my stakeholder pension provider was doing nothing legally wrong, they were using the mid range figure of the three growth figures, 5%, 7% and 9%, endorsed by the UK Financial Services Authority (FSA).
Finally, the FSA have taken on board that these figures are unrealistic and reduced them to 2%, 5% and 8%. However, finance companies don’t have to start using these lower growth figures until April 2014! Why the delay? In my opinion, the new figures should have been brought into use as soon as possible.
This delay is just exacerbating the problem of people not being able to realistically plan their retirement.