Lincoln Financial Group has designed a low-cost personal pension as an alternative to stakeholder schemes.
Lincoln lost its direct sales force last year and felt it was not practical to enter the stakeholder market. However, it wanted to offer a similar low-cost product and came up with personal pension direct.
The main difference between this unit-linked personal pension and stakeholder schemes is that the minimum contribution is higher. The minimum contribution for stakeholder pensions must not exceed £20 a month, but with the Lincoln product it is £30 for existing customers and £50 for new customers. Single contributions must be at least £2,000 for all customers, with a minimum top-up of £300.
The pension provides access to 23 funds from fund managers including Goldman Sachs Asset Management International, Delaware, Invesco Perpetual and Schroder. The funds available cover cautious, balanced and aggressive risk profiles. These include the Delaware emerging markets fund at the riskier end of the spectrum and the Lincoln UK capital protected fund for conservative risk profiles.
The charges on this pension mirror stakeholder as there is no bid/offer spread and the annual management charge of 0.9 per cent is within the 1 per cent stakeholder cap. Waiver of premium, where the company makes pension contributions if policyholders cannot make contributions if, for example, they are too ill to work is not available and there is only one free fund switch a year.
The Lincoln pension compares favourably with the Standard Life stakeholder plan, which offers just 15 internal funds. However, its annual management charge is lower than Lincoln's where the with-profits fund is chosen. In this instance, it is reduced to between 0.6 per cent and 0.8 per cent, depending on the size of the pension fund.
According to Standard & Poor's, seven of the 23 funds available with this pension are top quartile, 12 are bottom quartile based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to November 12, 2001. There is no three-year past performance for the UK capita growth, UK capital protected, unitised with-profits and select mutual funds.