Abbey's body-blow for stakeholder

ABBEY National, the mortgage bank, is withdrawing from company stakeholder pensions after disastrous sales since their launch a year ago.

The bank will continue to service 2,000 stakeholder plans already sold to companies for employee schemes, but will stop selling new plans. Stakeholder pensions for individuals will still be available from branches.

Marks & Spencer also recently pulled its stakeholder scheme offered to small businesses because of low take-up and high costs.

Just 2% of the targeted five million low earners have bought stakeholder pensions since they were launched in April last year. Because stakeholder pensions have a maximum charge of only 1% a year, providers are struggling to make them profitable. Many are not expected to break even on the pensions for up to 15 years.

Philip Scott, chief executive of Norwich Union, believes that of the 53 firms in the stakeholder market, only about half a dozen will still be around in a few years. Almost half of the stakeholder market is held by just three companies - Norwich Union, Standard Life and Scottish Widows - according to financial magazine Money Management.

Abbey National said: 'We are not pursuing stakeholder business from other companies because it is not worth the expense. The take-up of individual stakeholder pensions has been low, but no decision has yet been made to stop marketing them.'

Last month Ian Harley was ousted as Abbey's chief executive in a boardroom coup. Annual profits plunged by a third to £697m.