Selectapension’s new income drawdown comparison system is one such product. One of my favourite systems in the past used to be the Pensions Profiler package from O&M. For many years, they had the market for comparisons of money-purchase transfers to themselves, more recently, Selectapension began to introduce some much needed competition to this sector.
Now both offer advisers the opportunity to identify when it is in the client’s interest to change pension provider to reduce the effect of charge.
I looked at these packages in this column a couple of months ago – see The Switching Hour, Money Marketing January 29, www.moneymarketing.co.uk/cgi-bin/item.cgi?id=80013&d=340&h=341&f=342The introduction of an income drawdown service from Selectapension now gives advisers the opportunity to extend such services to cover comparison of drawdown plans.
This can compare drawdown plans both pre-crystallisation, that is, contracts still in accumulation, and after payments have begun. The service also includes a phased drawdown, maximum income calculator as well as draw- down critical yield and provider comparison.
At launch, the service provides the ability to compare income drawdown products available based on the actual client case using actual provider charges for its 18 providers, with three more due to be added shortly.
The software enables advisers to calculate both the A critical yield – the rate of return required to match the annuity that could have been purchased at outset – and the B figure, which identifies the return required to maintain a selected level of income.
Given the recent FSA interest in pension switching, it is a reasonable assumption that such drawdown switches may soon attract similar attention so having a software system that can fully analyse such transactions seems wise.
This is a valuable way for the adviser to identify if clients’ interests are best served by staying with the current provider or effectively arbitraging the situation and switching to a more competitive life office. However much the Association of British Insurers and some life offices might complain, it is not churning if the client is better off.
With increasing numbers of new products offering more flexibility, lower charges coming into the market have to be good for consumers. I am disappointed, however, that the service cannot yet look at third-way annuities or compare product guarantees.
As part of the process, the service filters out providers which will not accept crystallised funds as well as those who will not accept protected rights. The system is easy to use, with advisers entering basic client information and then details provided by the current scheme.
The software can treat protected rights separately, including examining the amount of pre and post-97 protected rights. If maximum income is being taken, it captures when the last reference period started. It can examine tax-free cash and income options as well as income-only and will then show the impact of each income option on each of the funds.
The system records a limited attitude to risk status information which needs more work but advisers can address such matters separately, this software is about number-crunching.
It does, however, allow different projection rates dependent on type of fund, , for example, different rates between different asset classes, which is is an issue that I understand the FSA are keen on.
When creating a comparison, advisers can enter the commission level they require, initial and/or renewal or to take a fee. The latter option is quite cumbersome.
The service will compare personal pensions, Sipps or personal pensions and Sipps combined as a league table showing which provider will deliver the greatest return based on their charges. The current value is shown with a green line, hence, all the providers listed above that line offer an opportunity for the client to get a better deal.
The system defaults to a standard 1 per cent annual charge but where other charges would apply, this can be amended manually. I am told that from next month this functionality will be automated via a Lipper feed. This is important to reflect FSA requirements on pension switching taking actual charges into account.
A detailed report is produced as a PDF for the client with graphics and the adviser can add their recommendation. I would have liked to see this linked to a suitability report generator or at least rich text export, even if some fields were locked down. Equally, as yet, there are no links to the leading client management systems and this would be a major benefit.
There are other types of research available to compare these products using services such as Synaptic Clarity which covers 37 products from 20 providers and the Aequos and Engage databases from Defaqto have some content on this.
Each of these enables comparison of product features and charges but they do not provide the number -crunching which is valuable for the adviser in demonstrating how customers can save charges.
Even at the retail price of £400 a year for the standalone version, I am sure this package would pay for itself many times over in the first month of use. There are discounts available for members of many of the leading networks and support groups. Pricing on their other software can be found at their website www.selectapension.com.
Overall, I would say this system is a bit of Windows 3.0, it is not the finished article. It is certainly better than anything else I have seen on the market for this type of analysis but there are a lot of fairly obvious things you could do to improve it and you would need to add a number of manual checks to the process to be sure of being fully compliant.
Having this functionality probably makes it sensible for any user of pension comparison software to review which system now best meets their needs.
It certainly throws down the gauntlet to O&M to come up with further enhancements. Competition is a good thing and I look forward to this driving both organisations to deliver better and better solutions to advisers.