Moving on to the main useful features and strong points of the bond, Reid says: “Access to a variety of funds and managers plus relatively cheap and easy switching.”
Bumford likes the relatively low limit on initial and top-up premiums, the wide range of funds and the penalty free switches.
Elms lists: “Guaranteed pension fund, free switching, fund choice and simplicity.”
Casting an eye over the bonus rates, Bumford says: “In the new climate of simplified charging structures alongside stakeholder pensions, the loyalty bonus adds an unnecessary tier of complexity.”
Elms says that loyalty bonuses are a useful lock-in. Reid says bonus rates are: “A potential mitigation of high charges.”
Turning to the disadvantages of the product, Elms says: “Name awareness, depends upon IFAs recommendation.” Reid mentions the cost.
Bumford says: “Probably the main disadvantage is the two tier charging structure, an inevitable feature of insurance policies using external fund managers. Since the majority of investors are unlikely to withdraw contributions within the first year, the encashment charge is a feature which many investors would see as unnecessary.”
Considering the flexibility offered by the bond, Reid calls it: “The only justification for selection.”
Bumford says that the range of internal and external funds is extensive and gives investment managers considerable flexiblity with their portfolio construction. He also mentions the internal switching facility.
Elms says: “Very useful. Skandia pioneered the trend towards external fund managers and are still the leaders in the field.”
The panel's opinion of Skandia's reputation is favourable. Bumford says: “Skandia has a significant lead in providing contracts which give access to the top investment companies, and in this respect the trustee bond fulfils expectations. Some aspects of previous complex charging structures does however still remain, and leaves scope for improvement.”
Elms says that personally he rates Skandia very highly, but that commercially he feels that they are the best kept secret in the market. Reid simply calls its reputation good.
When asked about Skandia's past performance record, Elms says: “We consistently find that throughout their range – life, pensions, unit trusts, offshore – over 50 per cent of their funds are in the first or second quartile, which is our yardstick.”
Reid calls it better than average. Bumford says: “Despite the wide range of external investment options, the track record of Skandia's own funds also show the ability to compete and will therefore provide a useful fallback position.”
Considering which products may provide the main competition, Reid says: “Other offices now offer limited external fund links – competition would depend on client needs.”
Elms says: “Other providers of trustee bonds with external fund managers – Sun Life, Scottish Equitable, Scottish Life for example.”
Bumford says: “At present there is little competition from other providers of unit linked trustee bonds, however looking to the future, the fund supermarkets will almost certainly take up the challenge of securing trustee investments.”
When asked whether the charges are fair and reasonable, Elms simply says yes. Bumford says: “Overall charges are comparable with direct investment into unit trusts and investment trusts.” He also mentions that the switching facility avoids having to sell your holding with one fund manager and buy with another, therefore paying another set of charges. Reid says they are about the norm.
Moving on to commission, Reid says: “We are not in a position to comment as we have no means of costing the operation or judging whether cheaper competitors are subsidising in some way.”
Bumford feels that the Sipp and Ssas market will move towards fee based work, and that commission payments will become less of an issue. However, he feels that the commission payments on this contract are fair compared with competitors.