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Eagle Star – Eagle Star Series IV Personal Pension

Type: Stakeholder-compatible personal pension plan with unit-linked and with-profits funds.

Minimum premium: Annual £750, monthly £75, single £5,000.

Minimum-maximum ages: 18-75.

Fund links: Threadneedle funds – secure, managed, property, managed income, cautious managed, long dated gilts, UK corporate bond, UK money securities, UK preference & fixed income, sterling bond, balanced managed, equity managed, adventurous managed, environmental opportunities, global bond, UK index tracker, UK equity, UK equity income, UK monthly income, UK growth & income, UK growth, European growth, European select growth, European smaller companies, American growth, American select growth, American smaller companies, global select growth, Asia growth, Japan growth, Japan smaller companies, Far East & Japan growth, Latin America growth, UK select growth, UK smaller companies, Eagle Star with-profits. Other funds – Baring managed, Foreign & Colonial managed, Gartmore managed, HSBC managed, Mercury managed, Perpetual managed, Fidelity managed, Framlington managed, Henderson managed, Lazard managed, Deutsche managed, Schroder managed.

Charges: None initial, 1 per cent annual reducing to 0.8 per cent for fund values above £50,000.

Allocation rates: 100 per cent if nil commission taken, 90 per cent if full commission taken, 95 per cent for single contributions.

Minimum term: None.

Special offer: First 12 fund switches free.

Offer period: Until further notice.

Tel: 0500 546 546.

Broker Panel:-

David Miles – IFA, The Mortgage & Pensions Centre

Colin Shaw – Director, Woodfield Financial Service

Malcolm Hooper – Partner, Independent Financial Advisory Services

Steve Perdisatt – Research manager, Burns Anderson

Barry Greening – Partner, Greenridge Life Pension & Mortgage Consultants

Broker Ratings (ave. marks out of 10):-

Investment options: 8.6

Flexibility: 6.6

Company&#39s reputation: 4.2

Past performance: 6.0

Charges: 6.0

Commission: 6.0

Product literature: 6.4

The Eagle Star Series IV Personal Pension Plan is a “stakeholder-friendly” personal pension plan which offers a choice of an Eagle Star with-profits fund, 35 Threadneedle funds and 12 externally managed funds.

The majority of the panel think the plan is most suit-able for the self-employed and people who do not have a company pension scheme. Greening says: “The self-employed are an obvious market but how will stakeholder affect them?”

Miles thinks the plan may appeal to clients with an active interest in fund performance. Perdisatt mentions clients who are working for firms needing to do something about stakeholder. But he adds the plan is more likely to be for clients willing to pay for advice in the post-stakeholder period.

The panel are critical on market suitability. Greening says: “I am bemused at the timing of the launch of this product. The pension market is a fiasco with the advent of the stakeholder and yet more legislation. It may have been more appropriate to wait until the full implications of stakeholder are known.”

Miles says: “With only seven months until stakeholder, this plan is an unwelcome and unnecessary addition to the marketplace.” Hooper and Perdisatt both point out there is a growing list of similar products.

Turning to strong points, Shaw says: “The main attractive feature is it is &#39stakeholder-friendly&#39. The charges are low if nil or little commission is taken and there is no monthly policy fee.”

Perdisatt singles out the wide fund selection, switching and waiver options and the absence of a policy fee. Hooper says: “In the main, the funds offered would seem to be top-quartile performers.” Miles thinks the plan is run of the mill and finds no outstanding features.

The panel hold contrasting views about the product&#39s flexibility. Shaw finds a lot of flexibility and feels the main attraction is reduction of premiums without penalty. Hooper says: “They are having to offer total flexibility at minimum cost.” Miles thinks flexibility is adequate but that the 12 free fund switches a year are gimmicky.

Greening says: “The flexibility is good but not unique. This market is driving towards a unit-trust-style charging structure with no penalties. What you see is what you get must be the future for pensions.”

Perdisatt feels it is not particularly flexible on minimum premium levels and commission. He also thinks it adds complexity when clarity is important.

Moving on to disadvantages, most of the panel feel the minimum premiums are too high. Miles says: “Minimum contributions are too high for a plan that purports to be stakeholder-friendly. If full commission is taken, the reduction in yieldcan be alarming.”

Perdisatt says: “Minimum premiums are too high. It is only stakeholder-friendly if the IFA takes nil commission. The allocation rate is as low as 90 per cent if full commission is taken.”

Shaw says: “The allocation rate will be low unless nil or negligible commission is taken. Most potential stakeholder clients are unlikely to want to pay fees to an adviser.” Hooper is concerned the level of minimum premiums may discourage younger people.

The wide range of investment choices go down well. Greening and Shaw think they are excellent. Perdisatt says: “The 35 funds offered by Threadneedle are a strong plus point. This investment house has a good reputation.”

But Miles says: “The choice of 48 funds is unnecessarily wide and will confuse most clients.”

On marketing opportunities, Greening says: “There is not a great deal at the moment with stakeholder. I believe charges that include policy fees will be a thing of the past.” Miles thinks there will be no opportunities.

Perdisatt says: “It is for clients who want to position themselves ahead of stakeholder.”

The majority of the panel feel the company&#39s reputation has been marred by its endowment policies. Shaw says: “Its reputation is mixed. Its with-profits endowment policies have been among the worst in the market. But long-standing pension clients have fared reasonably well.”

Hooper says: “I have always felt it is better known for general insurance. It has received bad press on its endowment contracts and has never appeared to be a leading light in pension provision.” Miles feels its reputation has recently improved due to its Threadneedle connection. But it is suffering because its low-cost endowment policies are proving to be off target.

Perdisatt thinks it has an increasingly good reputation for investment performance but is not so good on service. Greening says he associates Eagle Star with motor and household insurance rather than pensions.

Assessing past performance, Greening says: “It has not been brilliant but Threadneedle has a very good name. This should enhance Eagle Star&#39s position.” Miles thinks Threadneedle&#39s key pension funds have produced consistently above-average performance and are particularly strong for managed, European and American funds.

Miles says Legal & General, CGU and Standard Life are likely to provide the main competition. Hooper suggests all other stakeholder-friendly pensions. Perdisatt goes for CGU, Standard Life, Scottish Equitable and Scottish Amicable. Shaw says: “The main competition among IFA-supported companies would be Standard Life and Friends Provident. For direct sellers looking for a big office, it would be Virgin and Marks & Spencer.” Greening goes for Sun Life,Scottish Life and Skandia.

The panel are split on whether charges are fair. Shaw and Perdisatt think they are but Miles reckons they are high compared with other stakeholder-friendly products unless commission is sacrificed. Greening says: “They need to be reduced. On purely charge tables, this plan is bottom-quartile on our product sourcing software.”

Hooper, Miles and Greening think the commission is fair. Perdisatt points out clients would need to understand they could suffer a 10 per cent charge if full commission is taken. He adds: “This cannot be &#39stakeholder-friendly&#39 and does not compare well with similar products.”

The panel differ on the product literature. Hooper thinks it is easy to understand. Shaw says: “It is very good – easy to read and not over-glossy.” Greening and Perdisatt praise its clarity but complain it is not striking.

Miles says: “This is no more than adequate. Surprisingly, the client literature does not even mention stakeholder.”


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