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Transparency is key to L&G Portfolio bond

Legal & General

Portfolio Bond

Type: Unit-linked bond

Aim: Growth by investing in up to 10 internal and externally managed unit-linked funds

Minimum investment: Lump sum 5,000

Fund links: 208 funds from Legal & General, Aberdeen, Aegon, Allianz Global Investors, Artemis, Baring, Britannic, Cazenove, F&C, Fidelity, First State, Framlington, Franklin Templeton, Gartmore, Henderson, HSBC, Insight, Invesco, Investec, JPMorgan, Jupiter, Lazard, Legg Mason, Liontrust, M&G, Malborough, Martin Currie, Merrill Lynch, Neptune, New Star, Newton, Norwich Union, Old Mutual, Rathbones, Rensburg, Schroders, SG Asset Managemnt, SVM, UBS

Allocation rates: For policyholders under age 75 – investments up to 24,999 100%, 25,000-49,999 – 100.5%, 50,000-99,999 – 101%, 100,000 and above – 101.25%. For policyholders aged 75 and over investments up to 24,999 – 97.5%, 25,000-49,999 – 98%, 50,000-99,999 – 98.5%, 100,000 and above – 98.75

Charges: Initial 1.25%-2.5% for policyholders aged 75 and above, annual 1.3-3.26% depending on funds chosen

Switches: 12 free switches a year, thereafter 25

Commission: Subject to negotiation

Tel: 0845 2730008

Legal & Generals portfolio bond is a unit-linked bond, which provides access to 208 funds from a range of management groups for investments of at least 5,000.

Chadney Bulgin partner Bruce Bulgin believes this is an attractive investment bond which is more transparent than many other offerings because there is no bid/offer spread and no establishment charge over the first five years or so.

However, there is an early surrender charge over five years but this is no worse that that of other providers, he says.

Bulgin regards the adviser remuneration as generous. Commission can be given up on a one for one basis and the basic allocation is at least 100 per cent for anyone under age 75. These days many advisers would opt for reduced initial commission and would take renewal commission.

Looking at the bonds investment choice Bulgin says: In addition to L&Gs own funds, there is a wide range of external funds, and unlike many other external fund links, L&G states that these are holdings in the underlying funds rather than ‘mirror funds’ where performance can lag.

Bulgin notes that all the funds are available through the Cofunds platform and it is to be expected that the investment bond available through Cofunds – due to be launched next year – will be similar to the L&G Portfolio Bond.

On the potential drawbacks of the product Bulgin says: Charges for external funds appear high, but the reduction in yields quoted are similar to the annual fund charge. However, at first sight a charge of more than 2 per cent for many popular funds appears to be expensive.

Bulgin highlights the fact that even L&G’s in house funds are charged at 1.3 per cent – explained by the lack of an establishment charge – so for long term investments it could make sense to opt for a provider with an establishment charge and then a reduced annual fund charge.

According to Bulgin the L&G bond will compete with Skandia, Standard Life, Winterthur and other providers offering external fund links. While L&G has an attractive range of trusts, there is no discounted gift trust at the present time. he adds.

To conclude Bulgin says: “The new bond should prove popular with advisers and has the backing of L&G which has good administration and is financially strong.


Suitability to market: Good
Investment choice: Good
Flexibility: Good
Adviser remuneration: Good

Overall 9/10



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