The only reason for Scottish Equitable's flexible pension plan contract is to line the pockets of insurance companies and advisers, not to unbundle costs, as suggested.
I suspect it was put together by Scottish Equitable and a high-volume IFA. It is wrong to say the client cannot win but certainly the insurance company and the adviser cannot lose.
All the facilities offered with this product are available in the marketplace. If a client does not require investment choice, they have stakeholder, if they want a wider choice of investment, they have several Sipps, not least The Sipp Centre. More than generous commission is already available through these and other channels.
The product charges 1 per cent AMC and a separate establishment charge of up to 0.5 per cent of the fund per month for the first five years. At year 10, a 6 per cent fund bonus is paid and a further 0.3 per month from year 11 onwards. While it beats stakeholder after 12 years, the majority of cases will have stopped running by then.
If Scottish Equitable had promoted the contract on its merits, excluding the facility to take high up-front commission but added this on as an additional facility, it could have been acceptable.
However, to promote the contract blatantly on the basis that high-net-worth individuals wanting their advisers to take high commission will not lose if they keep the contract for 20 years is asking for trouble and virtually impossible to justify in this over-regulated world. I thought the financial service world had moved on from these rip-off contracts.
Richard Jacobs is director of Richard Jacobs Pension & Trustee Services