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Product matters

Skandia is one of the last offices to unveil a full range of single-charged pension plans.

Skandia always tries to be innovative and has taken on board some of the FSA&#39s comments by breaking down the fees into three components – its admin charge, a fund management charge and an advice fee.

Like many offices, Skandia is keen to get transfers and big single premiums so it will reduce its annual admin fee from 0.75 per cent to just 0.25 per cent on its personal pension, executive plan and trustee investment plan for funds of £50,000 plus.

The drawdown product has a reduced charge of 0.5 per cent when the fund reaches £250,000 and 0.25 per cent over £500,000. However, it still looks more expensive than many full self-invested personal pensions.

The usual impressive range of fund links is available with annual management charges varying between 0-1.8 per cent.

The final charge that can be added is the advice fee or commission. A range of fixed or percentage fees can be taken by unit encashment if the client agrees, which is useful. If an adviser want a normal commission-type structure, this is available using a loading on the AMC.

The top commission rate is 3 per cent initial plus 0.5 per cent trail, which is paid for by an additional 1 per cent annual charge.

Now, this is where I think the Skandia plan loses its way. Assuming the average fund charge of 0.9 per cent, the AMC becomes 2.15 per cent on plans of £50,000-plus, which in longer-term plans is going to look very expensive.

Ian Smith is a director at Central Financial Planning

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