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Eagle Star – Flexible Drawdown Plan

Flexible Drawdown Plan

Type: Hybrid Sipp

Minimum investment: £150,000

Investment choice: Global select growth, environmental opportunities, equity managed, European growth, Japan growth, managed, American growth, Asia growth, property, secure, UK equity, UK preferences and fixed interest, long dated gilt, UK index tracker, unitised with-profits, managed income, cautious managed, UK corporate bond, UK money securities, sterling bond, balanced managed, adventurous managed, global bond, UK equity income, UK monthly income, UK growth and income, UK growth, American select growth, American smaller companies, European select growth, European smaller companies, Japan smaller companies, Far East and Japan growth, Latin American growth, UK select growth, UK smaller companies, Baring managed, Deutsche managed, Fidelity managed, Foreign & Colonial managed, Framlington managed, Gartmore managed, Henderson managed, HSBC managed, Lazard managed, Merrill Lynch managed, Perpetual managed, Schroder managed.

Administrator: James Hay Pension Trustees

Charges: Initial option C 1.05% a month for the first five years, annual option B initial and fund based renewal commission 0.65%, option B nil commission 0.9%, option A, C 0.9%

Allocation rates: Option A and B initial and fund based renewal commission 97%, option B nil commission 100%, option C 102%

Commission: Initial option A 5%, option B and C 3%, renewal up to 0.75%

Tel: 0500 546546


Investment options 6.0

Flexibility 6.1

Company&#39s reputation 6.0

Past performance 6.5

Charges 6.5

Commission 6.4

Product literature 5.8

Bruce Coverley, Director of financial planning, Spectrum Financial Services, Barry Laymond, Senior practitioner, Barry Laymond Financial Services, Jeremy Parrott, Managing director, Birnbeck Finance, David Wingar, Partner, Courts Independent Financial Management.

Eagle Star&#39s flexible drawdown plan is a hybrid self-invested personal pension (Sipp) which offers investment in 36 Eagle Star funds and 12 external funds.

Commenting on how the plan fits into the market, Wingar thinks it is an expanding market but the initial investment at £150,000 is high compared to most competitors, which are £100,000. Coverley says: &#34It is a revamp of an existing plan with a longer track record than some recent providers.&#34 Parrot says: &#34The plan fits the market well, although I could not see anything that particularly sets it apart from an already well represented sector.&#34 Laymond feels it is just another entrant to a specialised market and in the end, the market place will have more product providers than the market can sustain.

Considering the type of client for whom the plan is suitable, Wingar says: &#34Those not wishing to purchase a conventional annuity.&#34 Parrott thinks it best suits those with sizeable pension funds who wish to exercise control over their investment and take advantage of the flexibility available when taking benefits. It will tend to appeal to the more sophisticated investor.

Turning to the marketing opportunities offered by the plan, Parrott says: &#34It gives another option when discussing and recommending providers, although this particular market is pretty well covered by most leading providers. In this context, marketing opportunities are likely to be fairly limited.&#34 Wingar agrees with this. Laymond says: &#34It is suitable for those seeking flexibility in managing their total pension pot.&#34 Coverley says: &#34It is useful in the reconstruction of SSAS and Sipp business, drawdown transfer business and someone wanting a free Sipp for 10 years subject to £150,000 being held with Eagle Star.&#34

As for the main useful features and strong points of the plan, Parrott says: &#34The plan uses a leading Sipp provider in James Hay, coupled with a respected investment house in Threadneedle. The external fund links are also from well-regarded investment houses. Flexibility is good, although no better than most other Sipps. Commission and allocation options will appeal to some.&#34 Coverley says: &#34Clear terms, no withdrawal restrictions, the range of 48 funds of which 20 can be held at any one time and the increased allocation for younger lives and larger amounts invested.&#34 Wingar says: &#34Access to the Sipp via James Hay at no charge if Eagle Star receives £150,000 into its own funds.&#34 Laymond likes the availability of self-investment, flexibility of death benefits and the ability to combine phased annuity purchase and income drawdown.

Looking at the range of investment options, Wingar says: &#34Eagle Star has a comprehensive range plus access to the market place through the Sipp.&#34 Parrott feels they are generally good funds to satisfy a reasonable investment spread. He adds: &#34I do, though, have reservations with most provider Sipps &#45 why not just go with the administrator and have access to the whole investment market? Coverley says he would like to choose funds from other investment companies not just the funds selected. Laymond says: &#34While covering most sectors, 36 of the 48 funds are managed by Threadneedle and 12 are from other fund managers.&#34

The plan&#39s disadvantages come up for discussion next. Laymond says:
&#34Once the fund is invested in the plan, the client cannot change their mind, the market value reduction factor may be applied if switched from the with-profits fund and the loss of all defined benefits if the investor is leaving an employer scheme.&#34 Parrott says: &#34The costs are not as low as they first appear. While Eagle Star will cover James Hay&#39s charges, investors must commit substantial amounts to Eagle Star to qualify and these funds have a range of charges associated with them. I would rather pay the pensioner trustee fees and have total investment flexibility which can be negotiated with fund managers.&#34 Wingar and Coverley say the plan&#39s £150,000 minimum investment and the fact there is no protected rights element, is a drawback. Coverley adds: &#34Option C is too expensive.&#34

The panel next comment on the flexibility offered by the plan. Wingar says: &#34Excellent, very comprehensive.&#34 Coverley says: &#34It is a clean contract under options A and B and you can mix and match between full and phased drawdown. Specific income amounts can be taken from specific funds if required and the timing can be varied.&#34 Parrott thinks the plan covers all the areas he would expect with a Sipp. His main reservation is with the amount Eagle Star wants invested in its funds. Laymond sees it as no more flexible than competitive plans.

Turning next to Eagle Star&#39s reputation, Parrott feels that it has sought to establish a reputation as a pensions provider, but there are better providers available. Wingar says: &#34Good. It is now Zurich Group&#39s flagship pension provider.&#34 Coverley thinks it has a good reputation for drawdown and trustee investment plan business, but public awareness of Eagle Star as pension provider is not great. Laymond feels that it is not a provider renowned as specialists in this type of pension business.

Commenting on Eagle Star&#39s past performance record, Parrott says: &#34It is mixed. Some of the Threadneedle funds are excellent, although they can be accessed via any Sipp. The with-profits performance is something of a mystery to me. It operates a number of such funds &#45 some have good performance while others look poor.&#34 Laymond says: &#34Threadneedle, which manages Eagle Star&#39s funds, has performed well over the last five years but the real test will be performance for five years from September 2001.&#34 Wingar reckons it is above average. Coverley says: &#34It is consistent. Threadneedle&#39s imput and Eagle Star&#39s own management is better than average.&#34

The panel assesses the competition next. Parrott says: &#34James Hay operates a number of similar Sipps through quite a range of providers and these will certainly compete. Mainly though, I would see non-provider Sipps as the main competition. They have more flexibility on investments, which I find is the main attraction to clients.&#34 The remaining panel members mention Standard Life, James Hay, Scottish Equitable, Winterthur, GE Life (formerly National Mutual), Legal & General and Sun Life.

Turning to the charges, Parrott thinks they are fair and reasonable for a hybrid Sipp product. Coverley says: &#34Yes under options A and B.&#34 Wingar agrees they are fair and reasonable, but points out investors need to place £150,000 with Eagle Star to avoid James Hay&#39s charges.

Commenting on the commission, Parrott says: &#34There is quite a choice here, but it inevitably impacts on overall costs. I personally feel that these products are better suited to fee-based advice. There is an option for nil commission, but certain strings are attached.&#34 Wingar and Coverley also think commission is acceptable. However, Laymond disagrees, saying the commission options are not as good as those available from competitors.

Looking at the product literature, Laymond says: &#34Bland but nevertheless clear and concise in detail. Why do product providers produce so many books to cover one product? While much detail is necessary, they should provide a more simplistic approach to brochures.&#34 Parrott thinks there is a lot of technical data which is necessary, but it is set out quite plainly. Wingar simply says: &#34Excellent.&#34 Coverley likes the improved transfer application and the professional briefing CD ROM.


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