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Will online pensionsclick withthe public?

Two major players are planning to sell pensions through fund supermarkets but are the Great British Public ready to buy online?

Despite a series of high-profile fund supermarket launches by big investment houses, many industry experts question whether the time is right for pensions to be caught up in the supermarket sweep.

One of the first to announce its plans is Bradford & Bingley, which intends to set up an online supermarket pushing stakeholder pensions and individual pension accounts to the group and individual markets.

It looks likely this will be done under the Charcolonline brand. Charcolonline managing director Toby Strauss says: “Consumer research showed going with the Charcol brand would be more effective.”

But Charcol&#39s brand is associated with mortgages. In a week when Norwich Union chief executive Philip Scott announced to the Aifa conference that brand will be a critical survival factor for stake-holder providers, it is questionable whether chasing a piece of the fiercely competitive stakeholder market via Charcolonline is the right move for B&B.

On the upside for B&B, internet-based propositions could rule the day in the 1 per cent world. Recent actuarial calculations carried out on behalf of Money Marketing revealed that the online stakeholder business model could be among the first to make a profit from stakeholder.

Some of the more positive debate surrounding stakeholder has also suggested the web is the natural home for decision trees. Given the proposed onerous format, it may be that decision trees lend themselves successfully to a format where consumers simply click through the various questions, rather than wading through pages of irrelevant branches.

Strauss says: “Decision trees are an important element because that is what the FSA wants but we will build around them with other front-end guidance.”

The financial services industry has often looked to the US for the shape of things to come in terms of e-commerce and it is perceived across the Atlantic that consumers are happy to execute major financial decisions online.

Providers may dream of the day when the low-earning stakeholder target audience is confident enough to buy online but high-profile security glit-ches at online banks may have put back such a scenario.

Wentworth Rose director Philip Rose says: “You need to keep costs down on stakeholder but there is no more confusing arena than pensions. You can draw a comparison with the amount of people who misbought mini and maxi Isas. What happens when people buy an online pension theydo not understand?”

Strauss is realistic about the objectives of any online stakeholder supermarket and emphasises the importance of a mix-and-match distribution strategy. He says: “Research shows the web is being used for research purposes. We think it might also be used for transfers.

“We want to offer a range of tools to offer the right audience the right channels.”

Alongside their online offerings, B&B and Charcol aim to give customers the choice of going into a branch, speaking to an IFA or phoning a call centre.

As B&B comes out with guns blazing on the Government&#39s proposed IPA, it may seem strange that it has taken a player from outside the conventional pension industry to be the first to see the potential for the proposed savings vehicle. But Strauss remains positive, saying: “There is no rea-son why IPAs should not figure in our plans.”

The second major player which has announced its int-ention to set up an online pension supermarket is Skandia.

Although Skandia has always been clear that it will not offer stakeholder, the company says it will provide an online pension service on the back of its mutual fund shop.

Where B&B&#39s offering will have a direct focus, Skandia is aiming to help intermediaries target the group and individual markets. Pensions brand manager Peter Jordan says: “At the moment, we offer clients the ability to divert contributions and check valuations. The next stage is to offer online quotes and then intelligent applications which aim to cut the amount of time it takes to fill in forms. This will cut down on time and cost. People are still going to need advice. This is the challenge facing any players planning to sell direct.”

Skandia&#39s planned pension supermarket has been welcomed by some IFAs. Torquil Clark pensions development manager Tom McPhail says: “This is an entirely appropriate move for Skandia. It has an excellent proposition but it is very expensive. If this brings costs down, I would be disappointed if it failed to see the plans through.”

Torquil Clark says it is planning to “do something similar”. With Fidelity rumoured to be looking at adding pensions to its online fund supermarket and rival Cofunds “not ruling it out”, the supermarket concept could become part of the changing landscape of financial products.

But Hargreaves Lansdown head of e-commerce Mark Rowlands says: “Not many customers are ready to purchase online. It is important to give clients the choice. Online panels which do not give consumers total choice are likely to be discredited.”


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