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Stakeholder-friendly choice

Scottish Amicable has introduced the Premier group personal pension, a

“stakeholder-friendly” plan.

The panel compare the plan with Clerical Medical&#39s Staff-Link company

pension plan and Scottish Mutual&#39s Universal group personal pension.

Looking at the market suitability of the plans, Cotter says: “The Scottish

Amicable plan offers all the elements you would expect from a prov-

which is trying to make a claim for business in the stakehol^_der market.

“Comparing it with the Scottish Mutual and Clerical Medical plans, I would

say that both Scottish Mutual and Clerical Medical are offering terms to

match the Government&#39s stakeholder criteria, that is, the 1 per cent annual

charge, but do not appear to offer extra features which distinguish their

plans from others in the market. Scottish Amicable&#39s plan fits into the

market well as it offers wide fund choices, internet-based support and a

range of commission.”

Rawnsley says: “All three companies have thrown their hats into the ring

by launching &#39stakeholder-friendly&#39 group personal pension plans. All three

companies are already active in the group pension plan market and have

adjusted their contract terms to meet the latest stakeholder guidelines.

“In essence, this has meant reducing contract charges, fund management

charges and commission. All three see themselves as serious contenders in

the stakeholder marketplace, which will event^_ually see few winners, with

a handful of companies dominating the market.”

Whittle says: “The Scottish Amicable plan should find a market in which to

compete but, as more companies dev^_elop similar products, it may be put

under competitive pressure from these new products. The Scottish Mutual and

Clerical Medical products are similar but Scottish Mutual does not have the

range of funds offered by Clerical Medical.”

Bottriel says: “The Scottish Amicable plan does not seem to have been

fully developed and the literature supplied seems to be sparse on details.

However, of the three, the Scottish Mutual plan is very suitable and has

clearly been designed to meet the stakeholder market.”

Turning to the types of marketing opportunities that the Scottish Amicable

plan offers compared with the other two, Cotter says: “Scottish

Amic^_able&#39s plan offers the opportunity to market the product as a plan

which will offer terms and services which will enable it to be used for

pension provision for an individual&#39s working life. IFAs can market the

flexibility of the Scottish Amicable plan and also the move to an

internet-based service over the next couple of years.

“The fund links they offer with many of the major fund managers could also

be a useful marketing opportunity.”

Rawnsley says: “All three plans appear to meet stakeholder requirements

and there is considerable activity among leading IFAs in this market ahead

of the statutory introduction of stakeholder. Those IFAs that consider

stakehol^_der as an opportunity rather than a threat are able to visit

clients with a view to putting in place a suitable GPP now, which will meet

the stakeholder criteria as they currently stand.”

Bottriel says: “Current marketing has to be widespread, quick and simple

and Scottish Amicable&#39s plan looks as if it is simple. On the other hand,

the Clerical plan is far too complicated to market because it would be too


Turning to the structure and flexibility of the plans, Rawnsley says: “The

structure of all three plans is very similar due to the constraints of the

stakeholder requirement on charges. All three will allow contributions to

be stopped, suspended and then restarted without penalty and retirement

benefits may also be taken early. Transfers out are also allowed without


“Other add-on features, such as life insurance and wai^_ver of

contribution benefits, may also be included. I feel a large part of the GPP

market will continue to be transacted on a fee basis and, to accommodate

fee-charging, all three contracts can reduce commission and charges

accordingly, thus improving the contract terms. All three are proposing to

offer internet-based admin systems, which is crucial in the lower-margin


Cotter says: “The structure and flexibility of the Scottish Amicable plan

is similar to
that of Scottish Mutual but offers more flexibility than

the Clerical Medical plan.

“The Scottish Amicable plan provides all the flexibility we would wish to

see in a &#39stakeholder-friendly&#39 plan and offers the structure to meet the

requirements of a variety of employers. The Scottish Mut^_ual plan is

similar but has limitations on fund choice. The Clerical Medical plan has a

limited number of free fund swit^_ches. This reflects the
fact that

Clerical Medical is only applying new terms to an existing plan.”

Commenting on the main useful features and strong points of the plans,

Rawnsley says: “From an IFA&#39s view-
point, Scottish Amicable loses out

to Scottish Mutual which seems to offer the most flexible and generous

commission menu without detriment to the contract and therefore to the

scheme member.”

Bottriel says: “The Scottish Mutual plan has simple char^_ges which are

known in adv^_ance, a simple choice of five funds and electronic

administration. Clerical Medical&#39s plan is very comprehensive and is

clearly very good for very large schemes. It also has a wide choice of

contribution collection.”

Turning to the drawbacks of the plans, Cotter says: “I cannot see any

problems with the Scottish Amicable plan while the Scottish Mutual plan

only offers a limited number of investment options and the Clerical Medical

plan is not as flexible as the other two.”

Bottriell says: “Scottish Amicable is not going to be ready for

stakeholder. This is clearly a GPP and it seems that it is hoping to

survive in the stakeholder market. This could be dangerous as the GPP

exemption for employers is only temporary and it seems given that it will

be reviewed.”

Whittle reckons the only drawback of the Scottish Amicable plan is that it

has no real bells and whistles to make it stand out from the other two.

Commenting on the three companies&#39 reputations in the market, Cotter

believes that Scottish Amicable has a fairly poor reputation in the market.

He says: “Since the take^_over by Prudential it has been making efforts to

improve fund performance and service and its reputation is being enh^_anced

Scottish Mutual would be considered a fairly solid provider while Clerical

Medical would be considered as one of the old school providers.”

Whittle says all three prov^_iders have well known names with good backing.

Rawnsley says: “In the pension marketplace, all three companies have made

reasonable inroads over the past few years, with Clerical Medical probably

having the strongest presence among IFAs.”

Assessing the charges for the three plans, Bottriell says all three are

working within a 1 per cent maximum to meet the stakeholder criteria.

Rawnsley says: “All three companies operate very competitive charging

structures to enable them to meet the stakeholder requirements as they are

currently known.

“This means that contributions rec^_eive 100 per cent allocation to unit,

so there is no bid/offer spread, no fixed
policy fees and each has an

annual management charge
of 1 per cent or less, depending on the level

of commission taken by the IFA.

“All three also allow transfers and early retirement without exit

penalties, again to comply with stakeholder rules.”


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