Type: Individual stakeholder pension.
Minimum premium: £20.
Minimum-maximum ages: 0-75.
Fund links: With-profits, UK growth, European growth, environ, US growth, FTSE all-share index tracker.
Charges: Annual 1 per cent.
Allocation rates: 100 per cent.
Minimum term: One month.
Options: Stakeholder term assurance, waiver of premium.
Tel: 08000 282727.
Investment options 6.0
Company's reputation 4.3
Past performance 4.0
Product literature 4.0
Steve Perdisatt, research manager, Burns-Anderson, David Divers, principal, Sandringham Investments, Brian Pack, principal, Brian Pack Financial Services.
The Co-operative Insurance Society (CIS) has brought in the individual stakeholder pension plan.
Looking at how the plan fits in to the market, Divers says: “With perhaps as many as 50 pensions due onto the market in the next few weeks, there will be some shuffling for position within the stakeholder market as each provider evaluates the opposition. It is not yet clear to what extent there will be a market. CIS, like everyone else, will adjust as the market becomes defined.”
Pack says: “It fits into the market very well, as it meets all of the stakeholder requirements.” Perdisatt says: “This product seems a fairly standard plan entering what is a crowded marketplace. However I cannot see it having any broad appeal to independent advisers.”
Turning to the type of client that the product is suitable for, Pack thinks that it is for anyone who is eligible for a stakeholder pension. Perdisatt says: “This is for employees in small to medium sized companies and possibly to individuals who are CIS clients already.”
Divers adds: “The pensions is for anyone who wants a cheap, no frills off-the-shelf product – the same type of person who buys Virgin, Marks & Spencer and other unsophisticated products and who is not willing to pay to get sound financial advice.”
Moving on to the main useful features and strong points of the product, Pack says: “The main plus point is the financial strength of CIS, although this is slightly counteracted by the company's old-fashioned branch image.”
Divers says: “The only useful feature of the product is that it helps New Labour fulfill its 1997 election manifesto. Beyond that it is cheap and cheerful, but no-one is going to get rich on it – neither CIS nor the planholder.”
Perdisatt says: “The strong points of the product are that it is straightforward, is easy to understand and has a simple charging structure.”
Looking at the drawbacks of the product, Divers is dismissive. He says: “The biggest drawback to stakeholder pensions is that they were ever introduced in the first place. I don't believe that they will, in the long run, serve anyone well except for the Government, which will be relieved of paying minimum income guarantees. The low charges will mean low quality.”
Pack thinks that the only disadvantage to the plan is that the waiver terms are not at all favourable. Perdisatt says: “The pension has limited fund choice. The charges are set at 1 per cent, which may be a hindrance given that competition in the marketplace is already driving charges down below this level. Also, from the information provided it is not clear what levels of support are available to scheme members.”
The panel are divided when looking at the range of investment options available. Pack says: “The investment range is very good, as it offers a full range of funds from a with-profits fund to a green fund, which should meet all requirements.”
However Divers says: “I am amazed that anyone still offers with-profits funds – they are so old-fashioned and do not compare with unit-linked funds. But then that is the image of CIS. Beyond that, I don't expect any of the funds offered to be top quartile – or top anything.”
Perdisatt says: “The investment option offer a limited choice. The default fund of with-profits means that there is a need to be careful, particularly given the potential impact of a market value adjuster.”
Moving on to the flexibility offered by the product, Divers says: “It has no features that you would not expect to find in any of these types of plans. All the flexibility is written into the legislation. The fact that CIS should want 14 days notice to switch is appalling – that it should want one month's notice to transfer is criminal.”
Pack agrees. He says: “The flexibility equals the stakeholder contract rules. However, the 30 day possible loss rule could put some people off this product.”
Perdisatt adds: “There is not much flexibility. Compared to the other stakeholder products that I have looked at, there is little to distinguish it. It simply seems to allow for the bare minimum laid down by the legislation.”
Taking a look at the reputation of CIS, the panel have mixed feelings. Pack says: “It has a very strong reputation, but also has a downmarket image.” Perdisatt says: “In the IFA sector CIS does not have a strong profile and I suspect would not be high in many people's thoughts. The company is probably known more widely as a solid general insurer.”
Evaluating the past performance record of CIS, Pack says: “The company's conventional with-profits fund is very strong, but it is using unitised with-profits and its equity record is only average.”
Divers says: “No one who is a professional will recommend this product so past performance is a bit academic. I it is just a pity that fund performance is not going to be CIS' motivation and its clients will not realise how important it is.”
Perdisatt says: “Its past performance is quite strong on the with-profits side, but is unspectacular or average on the unit linked range.”
Identifying the main competition that the product will face, Divers says: “I think that beyond the major life companies like Standard Life or Legal & General, companies such as CIS do not stand a chance. However it probably has a captive audience in the food stores – people who buy cheap food will buy cheap everything.”
Pack thinks that competition will come from similar plans from Standard Life, Legal & General and Prudential, while Perdisatt says: “The product will face competition from plans launched by the big banks, such as Barclays and HSBC.”
Moving on to the charges, Perdisatt says: “Given legislation, CIS could charge no more than 1 per cent, so its charges are fair in that sense. However, the competition can offer better charges, including tiering which reduces charges as the funds held grow in size.”
Divers adds: “The CIS charges are the same as anybody's really, although some of the providers who take larger amounts of business will have charges that come out cheaper.”
Examining the product literature, Pack says: “It is very plain and simple, which I feel is the ideal literature.”
Perdisatt says: “It is clear, well written and is easy to understand. It is good that CIS keeps it short and sweet, covering just the essential issues.” However Divers is less positive. He says: “It is bland and uninspiring – it could be mobile phone literature.”
Summing up, Perdisatt says: “Given that stakeholder involves giving a lot of support to employers and scheme members, I could not find anything on this issue in the product literature. If it is not dealt with elsewhere then it falls short on this crucial area.”
Finally Divers says: “Why hasn't the industry stood up to the Government and told them that stakeholder is fundamentally flawed in its thinking, structure and scope? Redesigning the polarisation framework to make it work is as flawed as the handling of the foot and mouth problem.”