The key issue here is the cost of the guarantees and the investment options.
The product is an investment bond, so this limits the potential market substantially due to the recent changes to capital gains tax.
The main problem I have in trying to review this product is to get a grip on the charges. I have been on to the Aegon Scottish Equitable website and I am still not sure what these are.
On one factsheet, it says: “The current disclosable charges/expenses are 0.5 per cent.” Nowhere can I find the annual management charge for this portfolio.
If something is “currently disclosable”, logic suggests that there must be other, non-disclosables. Life companies so frequently shoot themselves in the foot with this type of thing. If I cannot get to grips with it, how does a client?
Despite 90 fund links, there are limited investment choices if you opt for the guarantees. In my view, investors may as well take the most risk they can if their capital is guaranteed but the maximum equity content available is 70 per cent equity and 30 per cent fixed interest. With this level of fixed interest and the additional costs of the guarantees, there is bound to be an impact on performance.
History tells us that the probability of losing money in an equity investment reduces over time. This leads me to think that investors in this product might thank their adviser if markets fall over five years and decide to cash in but are more likely to be disappointed with the long-term performance.
Danny Cox is head of financial practitioners at Hargreaves Lansdown