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ScotMut smoothing the way to new with-profits

Scottish Mutual has become the latest company looking to reinvent

with-profits with the launch of its smoothed investment bond.

Drawing on many of Ron Sandler&#39s recommendations on with-profits, the

product is ringfenced with explicit charges – an annual management

fee of 0.85 per cent and a rebatable 1.3 per cent a year for the

first five years to cover IFA commission.

A dedicated website will feature a daily smoothed price, achieved by

taking a 12 month average. Investors can choose or combine an equity

fund or a bond fund with three free switches allowed per year.

ScotMut&#39s move follows the launch of Sandler-style with-profits last

year by Scottish Widows and Scottish Equitable. It is likely to

increase the pressure on the biggest providers of traditional

with-profits products – Norwich Union, Pruden-tial, Legal &

General and Standard Life – to launch a second generation of

with-profits products.

ScotMut closed its with-profits fund to new business at the end of last year.

Head of investment products Nick Kelly says: “The smoothed investment

bond combines a unique way of smoothing out the peaks and troughs of

markets with a high degree of transparency.”

Hargreaves Lansdown pension research manager Tom McPhail says: “This

does address many of the concerns about with-profits. Explicit

charging for advice is the way that the industry is going to have to

go. I would be astonished if the other big providers were not looking

at launching similar products.”

NU spokesman Ian Beggs says: “We believe that the 90:10 structure

provides advantages to consumers and is a better deal all round. But

we are currently working on alternative options that will utilise the

100:0 structure.”

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