Scottish Widows – Individual Pension Solutions
Type: Pre-stakeholder personal pension plan.
Minimum investment: Lump sum £2,000 monthly £65.
Investment choice: Fixed interest, indexed stock, mixed, international, consensus mixed, European, Japanese pension, global equity pension, property, building society, UK equity, UK equity index, safety plus, North American pension, environmental pension, Fidelity managed, Chase Fleming managed, Gartmore managed, Merrill Lynch managed, Newton managed, Perpetual managed, Schroder managed.
Charges: Annual 0.65-1 per cent.
Allocation rates: 100 per cent.
Options: Additional life cover, waiver of premium.
Commission: Subject to negotiation.
Tel: 0131 655 6000.
Alan Rangecroft – Consultant, Berry Birch & Noble
Steve Maffey – Partner, GMM Financial Services
Mark Oliver – Principal, Oliver Financial Planning
Adrian Wilkins – Senior Associate, Redcliffe Associates IFA
Broker Ratings (ave. marks out of 10):-
Investment options: 6.3
Company's reputation: 7.5
Past performance: 5.3
Product literature: 6.3
Scottish Widows' Individual Pension Solutions is a personal pension which it has based around stakeholder principles.
Considering how well it fits into the market, Rangecroft says: “Pseudo stakeholder products are currently industry fashion – a must have for providers who wish to remain in the personal pension market.”
Wilkins feels it is similar to the other products available, but concedes that: “It would have been difficult to be different.”
Maffey's view is that the timing of the product is right, bearing in mind the imminent arrival of stakeholder.
However, Oliver takes a different angle, and says: “It is nice to see that the personal pension as we currently know it – which can include life cover, waiver of premium and wide fund choices, also including external fund links – is going to continue to be availabe from Scottish Widows.”
Moving on to the type of client that the plan is suitable for, Maffey says: “It will suit all individuals, whether employed or self employed.”
Rangecroft is more specific: “Self employed and non-pensioned employed, on average and above earnings who are cost and brand conscious. Also fee based clients.”
Wilkins and Oliver look to the features of the product when giving their opinions. Wilkins feels the plan will appeal to people who are looking for stakeholder charges, but extra benefits such as waiver of premium, life cover and fund choice.
Turning to the sort of marketing opportunities that the plan will provide, the majority of the panel focus on the additional aspects to the pension. Oliver says: “The plan is going to be suitable for clients who do not want to be driven down the road of just buying on cost and ending up with a very basic product that is designed to fit all customers.”
Rangecroft does not think that the product stands out from its competitors, but feels that it provides a greater choice in the stakeholder category.
Maffey says: “It gives an alternative to stakeholder with a comparable charging structure.”
Wilkins is less enthusiastic, saying that the plan provides no obvious opportunities, except ongoing pensions advice.
When asked about the main useful features and strong points of the plan, the panel look at different aspects. Rangecroft says that the product: “Meets stakeholder terms for charges and flexibility. Scottish Widows has a strong brand name.” Wilkins points to: “Stakeholder charges with waiver of premium, life cover and fund links.”
Maffey feels that the range of investment options is a strong point, as well as the penalty free transfers and paid up facility. Oliver picks up on the fund links to external companies.
Looking further into the investment options, Maffey says: “The fund range is comprehensive with the notable exception of a unitised with profit option. The links to the external fund managers provide additional flexibility.”
Wilkins is largely in agreement, saying that he understands that the with- profit option may be added at a later date.
Oliver says: “I like the external fund links to the following fund managers – Gartmore, Perpetual, Newton and Fidelity. Internally, Scottish Widows has had trouble with their managed/mixed fund over the years. It has introduced the consensus mixed fund to give a degree of stability to its managed fund performance. I also like the global equity fund, which has had good fund performance over the last few years. It is a pity that the with profits pension fund has not been able to be included within this plan. I only assume that this is due to the fact that Scottish Widows is unable to be exact with the pricing for that fund.”
Rangecroft adds: “A broad spread of internal funds, which on the whole have not shown exceptional performance. The external funds offered are restricted to managed, albeit with some of the better fund managers. A wider spread of actively managed external funds would be desirable.”
Considering the disadvantages of the plan, Wilkins is quite complimentary, saying: “Except for the lack of with profit option, the plan has no real disadvantages.”
Maffey agrees that the lack of this option is a disadvantage, but also feelsthat the minimum premiums are a little high, as does Rangecroft.
Oliver also looks to cost: “This plan will look expensive, compared to other stakeholder plans that will become available. However, you cannot expect to have fund management flexibility, the ability to add life cover and waiver of premium within a cheaply priced pension,”
Next, the panel considers the flexibility offered by the plan. Maffey says: “Overall the flexibility is as good as you would expect. One area where it is a little restrictive is lifestyle switching. There are only three investment options where this facility is available, and the phasing periods are also too rigid.”
Oliver agrees that the flexibility is what you would expect, and Rangecroft feels it is standard for the type of policy. Wilkins adds: “As flexible as a personal pension can get.”
On the subject of Scottish Widows' reputation, Oliver says: “Scottish Widows is recognised as one of the best-known names in financial services.” Rangecroft says: “Historically, has had a high and respected profile with clients.”
Maffey feels it has a good reputation and excellent brand awareness, adding that service levels have been fairly good over the last few years. Wilkins adds that it will be interesting to see how the company fares under Lloyds TSB.
Moving on to Scottish Widows' past performance, the majority of the panel are less than enthusiastic. Rangecroft says: “Nowhere near measuring up toclients' perceptions – at best average.” Oliver says that it has left somethingto be desired, and Maffey calls it very mediocre.
Wilkins has a difference of opinion, saying: “Some good performing sectors, especially Europe. On the whole adequate performance.”
Looking at the main competition for the plan, the panel lists Barclays, HSBC, Standard Life, Legal & General, Friends Provident, Norwich Union, Scottish Amicable, Skandia Life and NPI.
The panel is in agreement when asked whether charges are fair and reasonable. Oliver says: “The charges appear to be very reasonable.”
Maffey feels that the charges are what you would expect for this type of product, and Wilkins says that they are dictated by the stakeholder pensions market. Rangecroft thinks they are: “Not out of range for this type of policy.”
There are mixed feelings on the subject of commission. Maffey says it is reasonable based on the charging structure, but adds: “Some competitors have decided to allow higher levels of commission in exchange for a higher annual management charge.”
Wilkins feels that the commission is in keeping with the industry norm. Oliver says: “The commission payable from this contract sits-in with what I expect stakeholder plans to pay.”
Rangecroft does not feel the commission is fair and reasonable, but says that it does represent what is available in the market.
Looking to the product literature, Wilkins says: “Clear and concise, however I would like to see the fund choices written on the application form rather than leave the boxes blank.”
Oliver simply describes it as clear, concise and easy to understand. Rangecroft adds: “Quite good quality, visually uncluttered.”
However, Maffey spots some problems: “The layout of the literature is reasonable, but I found the white print on a light green background extremely difficult to read.”
In summary Wilkins generally finds the product unremarkable, and says that this is how most personal pensions will look after April 2001. Maffey is of a similar mind, saying: “There is very little in this product to set it apart from any of the others that are available. Nevertheless, the name of Scottish Widows will work in its favour.”
Rangecroft feels that it will sell well because of the strong brand name, but has reservations on the performance of the internal funds. He adds that the integration of Lloyds TSB fund managers has caused difficulty, and does not auger well for the immediate future.