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Shuffling the pension pack

Perpetual has brought in a group personal pension plan with a choice of unit-linked funds. We asked our panel of brokers to compare it with two similar products, the GPP from Scottish Widows and a GPP from Standard Life.

Looking at market suitability, Rawnsley says: “Perpetual has a long established investment pedigree which lends itself to the pension market. The group pension marketplace is increasingly competitive and both Standard and Widows are very well established with long-term relationships with IFAs. Perpetual may find these relationships difficult to break into.”

Carr says: “With the imminent arrival of stakeholder in April, the GPP market should see an upturn in its fortunes as the new brand of GPPs now being written are as good as, if not better than, the stakeholder plans about to be offered.

“The new Perpetual GPP is a welcome entrant to what may become a boom market as employee perceptions of the importance of pensions change, with more employees going to expect an employer contribution.”

Anglesea says: “Perpetual has entered the GPP market at the perfect time – pre-stakeholder – with a product that should prove very attractive to many employers and staff.”

Moving on to the marketing opportunities, Rawnsley says: “It is difficult to see any additional opportunities that the Perpetual plan might offer compared with Widows and Stan- dard. If an IFA wanted to recommend a GPP purely on investment expertise and track record, Perpetual would have the edge, particularly after its takeover by Invesco.”

Carr says: “Perpetual has only recently been involved in the pension market. It has had good fund past performance and, with the recent merger with Amvescap in December 2000, it will offer a large and well respected fund group.

“Compared with Standard and Widows, it offers two advantages. First, communications assistance in leaflets and letters to employees but also possible input and attendance at enrolment and annual meetings. Second, electronic collection of premiums via “insite”, a website facility that offers pre-population of application forms, etc.”

Chapman says: “Being a new player in the market allows Perpetual the opportunity to start with a clean slate. This could give it the edge over companies that may have provided poor service in the past.

“But Perpetual does not have the experience of managing group pensions. It will struggle to convince IFAs it has the systems and staff.”

Evaluating structure and flexibility, Carr says: “All three are offering products that have been introduced or changed to run in line with the new stakeholder plans that are to be introduced so all three plans are similar in make-up and flexibility.

“As terms and conditions are so similar, the products will be advised more around performance and administration as, if the providers do not perform, firms will change providers, especially as there are no penalties for changing.”

Rawnsley says: “The structure and flexibility of all three plans are fairly similar. Each will allow employees to stop and start contributions and transfer or draw pension benefits at any time, subject to appropriate legislation. The Perpetual plan does not give the employer and IFA the opportunity to tailor charges and commissions to suit.”

Anglesea says: “Perpetual&#39s GPP allows the IFA and client to agree on a fee or commission arrangement at the outset, based on single-premium commission rates. It also has a low minimum contribution of £20 a month with the option of automatic indexation.”

Identifying the main strong points, Rawnsley says: “For me the main attraction of the Perpetual plan is its long-term investment track record. It has also tried and tested administration systems in other areas and, although I have yet to test its GPP systems, I would be confident it could deliver the goods. Perpetual also has a well developed website where clients can access information at any time.”

Chapman says: “The few distinguishing marks of the Perpetual contract are that there is no minimum term and offers free fund switches. But the contract does not stand out in any area when compared with Standard Life or Scottish Widows.”

Turning to drawbacks, Chapman says: “Perpetual offers lower financial strength than the two others and limited commission terms when compared with the flexibility of Widows and Standard. There is no Perpetual with-profits fund while the other two offer successful with-profits funds. It also has only five fund choices compared with 23 offered by Widows.”

Rawnsley says: “Under the Perpetual GPP, it is not possible to include life cover as part of the scheme and this must be arranged separately. Scottish Widows and Standard Life offer this facility as a part of their standard scheme.”

Anglesea says: “Perpetual only offers five funds, three equity funds plus fixed interest and cash. Scottish Widows and Standard Life offer a far wider range.”

Looking at the reputation of the three companies, Rawnsley says: “Both Standard and Widows have been established in the GPP market for many years. Widows&#39 reputation has been somewhat tarnished by poor administration in the past but the huge resources of Lloyds TSB may improve this.

“Perpetual has an excellent reputation in the investment market but has barely scratched the surface of the GPP market. Its merger with Invesco, bringing the immense resources of Amvescap, may help raise its profile in this marketplace.”

Carr says: “Standard Life has the best reputation in the GPP market compared with the other two. Widows has only a fair reputation but it is now backed by Lloyds TSB. Perpetual has very little reputation in the pension market but has a good reputation with IFAs and with investors. Standard Life has the best reputation of all three.”

Moving on whether the Perpetual product will generate more demand from clients than the other two GPPs, Chapman says: “Perpetual is starting from scratch and will struggle to generate any additional demand. The product is not of a high enough quality to warrant this.

“It will have to get in to IFAs&#39 offices and present its case very carefully if it wants a piece of the action. I feel IFAs will ignore this contract and will favour the large product providers, such as Scottish Widows and Standard Life, with their proven track records, large fund choices and more flexible plans.”

Carr says: “The Perpetual product will not generate more demand. Most firms will still prefer to invest with an insurance company with a good reputation and which is a household name, such as Standard Life.”

Rawnsley says: “In the short term, I do not see the Perpetual GPP generating increased demand from clients. Assuming its new owners are prepared to commit resources to achieving market share and given that it expands the fund range available, demand for its product may well increase.”

Commenting on product literature, Carr says: “Perpetual&#39s literature is professional, easy to understand and straightforward. Scottish Widows&#39 literature is basic and uses scaremongering to convince the emp- loyee to make a contribution. Standard&#39s literature is bland, boring and uninspiring.”

Rawnsley says: “The Perpetual product literature follows that of its investment products – it is clear and professional-looking. The Widows&#39 literature is reasonably concise and professional looking. The Standard Life literature is quite dull and not nearly as well laid out as the other two.”

Summing up, Chapman says: “Perpetual needs to increase the fund choices and this may mean external links. It is becoming more and more difficult to differentiate pension products. Eventually the ultimate factor may well be service. By definition the bigger the provider and better the economies of scale. This should lead to greater quality of customer service. Perpetual will have to invest time and money to build a reputation and this will have to be done quickly if it is to survive.”

Rawnsley concludes: “I believe the number of companies which can successfully compete in the GPP market will decrease over the next few years. Those companies succeeding will need to be able to offer low charges, efficient administration and a successful investment track record. Relatively late entrants to the market, such as Perpetual will have to commit considerable resources to the product and its promotion.

“It seems inevitable that the pressure on charges brought about by stakeholder pensions will widen into other products such as GPPs under a regime which seems to believe that cheapest is best.”

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