Standard bearer

We will start this month&#39s article with congratulations to Standard Life. At one stroke, it has removed potential problems with existing policies by moving them to a mono-charge structure from April 2001.

It is offering an annual management charge of 0.825 per cent (or 0.6 per cent if no commission is taken) for money from existing contributions and a stakeholder-matching 1 per cent for increments.

While not entirely removing the possibility of material disadvantage on recent policies written on full commission terms, the move will avoid the necessity for IFAs to worry about what to do about increments and how to deal with clients with older policies.

CGNU, under its new

style of Norwich Union, now offers a full range of personal pension and group personal pension policies to address the stakeholder needs of a wide variety of clients through its Your Pension and Designer Pension products.

Increased choice for advisers in the individual stakeholder pension market is provided by Eagle Star, Scottish Equitable and Standard Life.

Scottish Equitable has a strong following among IFAs. This is bound to increase

confidence in the company when advising on pensions

in the run-up to April 2001 as

it indicates its commitment

and ability to remain a strong player in the mainstream pensions market.

One point highlighted by the range of companies off-

ering stakeholder-friendly plans is that there is precious little to choose between any

of the policies on product

terms alone. Most offer identical charging structures, a similar range of funds and waiver of premium and some offer pension term insurance within the policy.

Beyond this, advisers can select on the basis of fund performance but it is questionable whether there is any discernible consistency of performance among providers over the long term.

In some ways, the similarity between products is a positive step. It reduces the time and effort required to select a policy based on individual client circumstances and trade off high maturity values against reasonable premium suspension or transfer terms.

But it does not reduce other elements of the advice process and this brings us back to the question of how IFAs are to be remunerated for their advice. Some are happy to charge fees and some clients are happy to pay them. A fee can still be viewed as a significant front-end load although its effect is not seen in illustrations.

The mono-charge products available offer the facility to take a higher remuneration by increasing the annual management charge above 1 per cent, usually to as much as

1.5 per cent.

For some companies, this results in an initial commission of up to 75-80 per cent of the current Lautro scale. This certainly helps the situation but the increased management charge will impose a significant drag on bigger funds and leaves business open to attack at a later stage by companies offering lower annual management charges.

Provided that the client is aware of what is happening from the start and is happy to pay for the advice, this should not prove too much of a problem. Another alternative is offered by NU through its Your Pension Select. This product allows for extra commission by reducing the allocation rate

for a short period but maint-

ains the annual management charge at 1 per cent, adding some complexity in order to provide stakeholder terms once the initial period passes.

Again, clients should be made well aware of what is happening to avoid the possibility of material disadvantage concerns at some point in the future. As ever, communication is at a premium.