personal pension plan
(Average marks out of 10)
Investment options 5.5
Company's reputation 5.5
Past performance 5.0
Product literature 7.8
HSBC's personal pension is a stakeholder-friendly plan which offers a range of unit-linked funds.
Looking at how the plan fits into the market, McCrory says: “With April 2001 and stakeholder approaching, HSBC's personal pension plan mirrors the Government's requirements for charges, flexibility and simplicity. However, other companies' schemes will fit in equally well due to the level playing field.”
Posner says: “This is a stakeholder-friendly personal pension plan which can be converted to a full stakeholder pension when the new rules are in place in April 2001.”
Searle says: “The plan appears to be trying to fit in with stakeholder criteria and yet it is a personal pension plan, including a waiver of contribution facility. As a stand-alone plan, it appears to offer low costs.”
Turning to the type of client for whom the product is suitable, Both says: “This is for direct clients who want a simple pension without advice.”
Searle says: “This is for any individual who wishes to arrange their own personal pension plan prior to the inception of stakeholder plans and who does not know an IFA.”
McCrory suggests the plan is suitable for people on low incomes who want to make small contributions, with the facility to stop and start as they wish. “Human nature being what it is, the lack of the element of forced saving will be detrimental to the accumulation of a decent fund,” he says.
Examining the marketing opportunities that the plan will provide, Posner says: “As this will be sold by the bank to its existing customer base, it is likely the marketing will be targeted at existing customers.”
McCrory says: “For the IFA, there will be very few marketing opportunities. HSBC does not have a high profile in this market at the moment and the lack of commission will deter IFAs.”
Searle comments that the marketing opportunities are very limited. “The HSBC plan has nothing special to merit attention,” he says.
Looking at the main useful features and strong points of the plan, Both regards it as being clear and simple.
Searle says: “Apart from endeavouring to fulfil the current stakeholder criteria, the plan includes the following features – waiver benefit to age 65 for men and 60 for women, the choice of four HSBC funds, free switching between funds, flexibility of contribution levels and a low single-premium requirement although, if a premium holiday is required and 28 days' notice is not given, the policy is made paid up.”
Posner says: “One strong point is that it is a stakeholder contract with charges limited to the 1 per cent laid down. It also has life cover and waiver of premium.”
McCrory says: “Its flexibility, simplicity and low charges are obvious strong points but other companies will be on a par with it. The waiver of premium and pension term insurance options also give it an edge over stakeholder.”
The panel have differing opinions when it comes to the range of investment options available. Searle and Both regard the options as being limited. However, Posner says: “The investment options are more adventurous than I would have anticipated, going from fixed interest up to a broad-based international fund via a FTSE All Share index-tracker fund.”
McCrory says: “Four funds follow the stakeholder philosophy and give a wide choice for the investor. The secure fund mirrors the with-profits fund of other companies to protect gains made.
“The Government appears to be doing a U-turn on with-profits funds for stakeholder after an initial period of not favouring them.”
Examining the drawbacks of the product, Both says: “There is a lack of fund range. Also, it does not appear to be web-enabled which, given its mass-market focus, is a real missed opportunity.”
Searle says: “There is a limited range of investment funds and an expensive waiver of premium benefit. The waiver benefit is only available for up to 24 months for an own-occupation definition. After that period, the definition changes to any occupation.”
Looking at the flexibility of the product, McCrory says: “The option for stop-start premiums and the minimum amount of £20 involved for increasing premiums or lump-sum payments make this attractive. The flexibility involved in switching funds at no cost is good, too, and the main funds provide access to a wide range of investment opportunities.”
Posner says: “This has reasonable flexibility, with a low regular initial contribution of £20 a month and single contributions from as little as a further £20. Regular contributions can also be increased by any amount over the minimum £20 a month.”
Searle says: “The low starting level of contribution at £20 a month would appeal to many people and, subject to advising HSBC in advance, premium holidays are allowable. In addition, the low level of single contribution is attractive.”
However, Both regards the flexibility offered as being nothing special.
Turning to the reputation of HSBC, the panel are a little lukewarm. Searle says: “Its reputation is satisfactory for a major banking group but the name does not immediately spring to the mind of an IFA when considering the most appropriate pension plan for their clients.”
Both says: “It is okay in investments although Midland Bank's reputation was nothing to shout about.”
Posner says: “As one of our major banks, its reputation is secured by its major high-street presence. It has a ready-made market which it will use its best endeavours to exploit, which is both normal and acceptable.”
McCrory says: “It does not appear to have a high profile for this type of business. I could not comment fairly on its reputation in Northern Ireland, as it only has an office in Belfast.”
Examining the product literature, the panel are again positive. Both says: “It is very good. I like the black and white application form, which is easy to photocopy.”
Posner says: “There is reasonable presentation of the contract benefits and risks. But having chosen to launch it pre-stakeholder, there is very little on the stakeholder arrangements that will be made next year.”
Searle says: “It is reasonably well presented. However, the application form is somewhat daunting even to an experienced personal adviser, although it is laid out quite well.”
McCrory says: “The literature is very good. It is attractive and colourful and the language is simplicity itself. The main points are covered succinctly and each paragraph is short and to the point. For those requiring more detailed or technical information, the two supplementary booklets are very helpful.”
Summing up, Posner says: “HSBC has a ready-made market and it requires a product to sell to that market. Whether or not the launch is premature, only the next few months will tell, but I anticipate a deluge of these and I would be inclined to hang on for a few more weeks to be able to sort the wheat from the chaff.”
Michael Posner l Principal, Charter Devon Law,
Gordon Searle l Director, Amor Searle & Co,
Michael Both l Partner, Michael Phillips,
Nick McCrory l Partner, Armstrong McCrory