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This week in Pensions

Scottish Life finally unveiled the latest “unique” Sipp offering, hoping to secure a healthy slice of the multi billion pound market.

In doing so the firm could not resist a dig at more well-established Sipp providers, promising that, unlike with competing Sipp offerings, customers will only pay for what they need.

The product, launched on 4th December, is built on top of the firm’s individual personal pension product, which has been rebranded as Pension Portfolio.

Scottish Life boasts that the offering has been built with the requirements of TCF very much in mind. In other words, it says customers will not be channelled into higher charging Sipps if they don’t require the added flexibility.

Only a small proportion of its customers will be advised to go into the Sipp, with the majority remaining in the personal pension. Based on industry experience, it estimates about 10 per cent will use the self investment flexibility while the majority will use the core investments and remain fully insured. This fact, it believes, is being conveniently ignored by some providers.

The Sipp operates a two tiered charging structure – 300 per year for online investments and 550 per year for full investments.

Those opting for online investments will have access to over 1,000 funds through FundSupermarket and the ability to trade in stocks and shares through Selftrade, which will carry an additional transaction charge.

Other permitted investments, such as UK commercial property, Government and corporate bonds, and bank and building society deposit accounts will also be available.

High net worth clients will have access to a panel of discretionary fund managers including Cazenove Capital Management, with minimum investment of 200,000, Rathbone Investment Management (100,000) and Tilney Investment Management (100,000). Cazenove charges 1.1 per cent AMC on the first 5m, Rathbone also charges 1.1 per cent and Tilney 1 per cent.

For full investments not available online and requiring an application form there is a fee per transaction of 145 and a 145 annual holding fee.

IFAs advising customers to go into the Scottish Life Sipp can be remunerated using the Financial Adviser Fee, whereby advisers agree with the client the cost of the advice at the outset.

Scottish Life head of individual business Barry Shields says one of the key advantages of its product is its managed strategy – used for its individual PP – which monitors the asset mix of customers’ portfolios quarterly.

But all this talk of managed strategies is unlikely to leave the likes of Standard Life and AJ Bell, which are both taking in well over 100m in Sipp business per month, quaking in their boots.

Any adviser in a quandary as to whether to advise contracted out customers to contract back into the State Second Pension will naturally look to counterparts and providers for clues and trends.

Legal & General’s latest mailing to contracted out customers show that 83 per cent have chosen to remain contracted out of the State Second Pension.

Based on 3193 responses received as at 13 November, 2644 customers opted to stay contracted out – attracted, presumably, by the added flexibility.

The news will come as a surprise to many, particularly with providers recommending contracting back in as the best way of maximising their pension.

It also comes as several firms such as Norwich Union continue their policy of mass contracting in customers that have failed to respond to correspondence presenting them with the options.

This move has been criticised by Legal & General pensions strategy director Adrian Boulding who says people contracted in without their knowledge may well have grounds for a misselling complaint if they lose out as a result.

But NU has defended its strategy, arguing it has done everything possible to make customers aware of the options.

Boulding, who recently issued a podcast explaining the relative merits of contracting out versus contracting back in, says:

“While it is still early days, on the basis that those who reply quickly usually have the strongest views, the results vindicate our stance on the importance of giving customers a choice regarding their contracting out decision.”

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