LEGAL & GENERAL
GROUP STAKEHOLDER PENSION
Type: Group stakeholder pension.
Minimum premium: £20.
Minimum group size: 1.
Minimum-maximum ages: From birth-75.
Fund links: Consensus fund, European equity index fund, Japanese equity index fund, UK equity index fund, US equity index fund, global equity index fund, global equity fixed weights index fund, cash fund, distribution fund, equity fund, ethical fund, European fund, Far Eastern fund, fixed interest fund, index-linked gilt fund, international fund, managed fund, North American fund, property fund, UK recovery fund, UK smaller companies fund, Newton income fund, Newton higher income fund, Newton international growth fund, Newton balanced, Deutsche UK equity fund, Deutsche overseas equity fund, Deutsche global growth fund, Deutsche balanced fund, SG UK 350 equity fund, SG Legal & General balanced fund, SG Europe equity fund, SG Legal & General global equity, JP Morgan lifetime growth fund, JP Morgan lifetime moderate fund, JP Morgan UK disciplined equity fund, JP Morgan global (all world ex-UK) equity fund.
Charges: Annual 0.3-1 per cent.
Allocation rates: 100 per cent.
Minimum term: One month.
Commission: Choice of fund based 0.2-0.4 per cent, level 1.25-2.5 per cent, level 1.25 per cent plus fund based 0.1 per cent, level 1.5 per cent plus fund based 0.15 per cent, one times monthly premium, one times monthly premium plus fund based 0.1 per cent or one times monthly premium plus fund based 0.2 per cent.
The panel: Nigel Hemming, Director, Allen French & Co,
Alan Lakey, Partner, Highclere Financial Services,
Barry Laymond, Senior practitioner, Barry Laymond Financial Services,
Helen Richardson, Managing director, Bell Financial Planning.
Company's reputation 7.3
Past performance 6.0
Product literature 6.3
Legal & General's group stakeholder pension is aimed at employers who are legally obliged to offer a stakeholder scheme. It provides access to a range of Legal & General unit linked-funds and external funds managed by Newton, Deutsche, SocGen and JP Morgan.
Looking at how the plan fits into the market, Hemming says: “Like all the major players in the market, Legal & General is striving to capture the market share. The market is becoming fairly homogenous and the differences between the big players are minimal. It will come down to marketing, investment performance and administration.”
Laymond says: “It is another plan chasing the stakeholder market which will probably do well purely on the company's household name.”
Lakey says: “Legal & General's commitment to the stakeholder market is undoubted. Its multi-pronged distribution will ensure this plan's success.”
Discussing the type of client the plan could suit, Laymond says: “Small to medium sized companies with 50 to 100 employees or larger companies according to L&G. My view is that it is better suited to those companies which use modern technology and who have well-organised administration and payroll systems.”
Hemming says: “If a number of the features are to be used, it will be best suited to the bigger companies. It will also be good for multi site locations.”
Richardson says: “Any company which has decided it needs to take action to comply with the stakeholder regulations if they are not exempt.”
Lakey says: “Those who feel more comfortable with a household name.”
Assessing the marketing opportunities for the plan, Richardson says: “I am actively marketing stakeholder as a concept and any further entries into the market, especially big names with swift admin systems and user friendly literature, are most welcome.”
Hemming says: “The range of marketing material should allow for most types of marketing. The sales support range is good for employees.”
Laymond says: “The use of this plan and sales aids provided will assist those IFAs who do not have their own marketing departments.”
Lakey is unimpressed. He says: “It offers nothing special. All stakeholder plans offer basically the same attributes and suffer the same disadvantages.”
Identifying the best features of the plan, Lakey says: “Flexibility of contribution and retirement age, a lack of penalties and low, capped charges, like all stakeholder plans.”
Hemming thinks the payroll system is the strongest feature. He also mentions the product literature, although he thinks there is too much of it.
Richardson points to the company name and one of the brochures called Employer's Steps 1-5. She adds: “The charges are tiered like Norwich Unions, so effectively loyalty payments are made to customers whose fund grows with them.”
Assessing the range of options, Richardson says: “Aside from the concept of stakeholder itself, the real options lie in the administration method and the online pensions management system for time consuming enquiries such as projections.”
Lakey says: “This plan does not appear to offer anything different.” Laymond agrees and adds: “No more or less than the competitors in this market.”
Hemming says: “It is very much the standard range among the big players.”
Identifying the drawbacks of the plan, Lakey says: “From a client's perspective, there is a limited fund choice and a possible belief that low charges equate to superior end results.”
Richardson is more vocal. She says: “Will stakeholder really work? Has it missed the target market anyway? Are people that bothered about boring old pensions? Will this just become a rich man's investment toy with a playground full of rich kids in, say, 18 years' time?”
Laymond says: “Pension payment protection would be more beneficial if available after three rather than six months.”
Hemming thinks there are no obvious disadvantages to the product.
Assessing the flexibility of the plan, the panel agree that it is similar to other stakeholder plans. Hemming says: “It is standard. It is difficult to be innovative in this field. It might be a disadvantage to be too clever - remember comps?”
Laymond says: “Much the same as competitors would offer. Contributions are variable, unlimited premium holidays can be taken, there are no transfer penalties, or early retirement penalties and pension payment protection is offered. There is also a wide range of investment funds.”
Richardson agrees with Laymond and adds that it is fairly standard.
Lakey says: “It is no more or less flexible than any other stakeholder provider.”
Moving onto the company's reputation, Laymond says: “It is a well-known household name which has been trading for over 160 years.”
Hemming says: “On the whole it is good. It has the marketing muscle to be a stakeholder player.”
Lakey is cautious. He says: “It is an exceptional brand to the public, but one that advisers are wary of trusting. It tries to be all things to all men.”
Richardson says: “Generally, it is quite poor administration-wise, but its umbrella profile has always been high and its roadshows are usually quite interesting.”
Turning to the company's past performance record, Lakey says: “It has been average over the last five years on balance. Not a leader, but a plodder.”
Hemming says: “Legal & General's past performance could be stronger and will need to be better in the future. It is innovative, but the core range if performance funds is weak.”
Richardson says: “It is okay but not absolutely fabulous.”
Laymond is out on a limb. He says: “It has a solid past performance record with Standard & Poor's AAA ratings since 1988, which is only matched by Standard Life and Prudential.”
Identifying the competition the plan will face, the panel agree that Norwich Union is the one to watch. Laymond says: “Norwich Union, Clerical Medical, Skandia, Sun Life, Scottish Equitable, Standard Life and Winterthur.” Hemming goes for Norwich Union, Friends Provident and Standard Life.
Lakey says: “Standard life, Clerical Medical and Norwich Union.”
Richardson cites Norwich Union's your pension and your pension select plus Axa Sun Life's stakeholder.
Discussing the charges, Richardson says: “They are okay - what can one say when there is a 1 per cent maximum?” Laymond says: “The charges are limited to 1 per cent and based on fund values. As the fund increases, charges reduce to 0.8 per cent at £25,000 and to 0.6 per cent at £50,000 or more.”
Lakey says: “The reducing fund management fee which is also used by Clerical Medical makes absolute sense.”
Turning to commission, Hemming is happy with it but Lakey is not
Laymond says: “It is in line with other companies and only suitable for IFAs set up to handle group pensions and who can trade electronically.” Richardson says: “It is fair as long as you can afford to take a long-term view on fund-based commission or are appropriately placed to charge fees.
Looking at the product literature, Richardson says: “It is okay for me but perhaps a little wordy for most clients. The fliers are quite visual.”
Laymond says: “It is very clear and written in plain English so it is easy for clients to understand. However, as with other providers, it has too much literature.” Lakey says: “It is clearly aimed at the employer rather than the individual. It is helpful but a little over-the-top on the number of brochures.”
Summing up, Hemming says: “This is an area in which it is difficult for companies to be different.”