Article date: 1 October 2004
Norwich Union has been reviewing its individual pensionsstrategy throughout 2004 to see how it needs to develop and refineits product range and pricing strategy to respond to the changingmarket dynamics. Following the Treasury announcement in June, of astakeholder price cap at 1.5% pa* from April 2005, together with aproposed basic advice regime, Norwich Union is now in a position toconfirm its approach to individual pensions within this newframework.
Norwich Union believes that the new charging structure forstakeholder pensions should be able to support the proposed basicadvice process. However, despite the increase in the price cap thecompany does not see this new charging structure as beingsufficient to fund the full financial advice process for lowerpremium business.
Norwich Union is a strong advocate of financial advice forpeople looking to plan for their retirement. To cater for customerswho wish to seek full financial advice on pensions, the companywill be launching a new ‘non-stakeholder’ pensionproduct in early 2005 with a charging structure designed to supportthe provision of full advice. This new product will offer greaterchoice than stakeholder, including a wider range of funds.
To reflect the lower level of advice and costs of the basicadvice regime on stakeholder pensions, Norwich Union is reducingthe levels of commission on regular premium individual stakeholderpriced pensions, by two thirds. The changes are effective from 4October 2004. Group stakeholder pension products will remainunchanged.
Norwich Union intends to keep a strong foothold in theindividual pensions market but its main focus will continue to bethe group pensions market.
The charging structure for existing Norwich Union stakeholdercustomers remains unchanged.
Commenting on the changes, Peter Hales, sales & marketingdirector, said: "We believe that financial advice is essential toencourage people to save and therefore help the pension marketgrow. While the new stakeholder pension cap should support thebasic advice process, it will not be sufficient to fund full advicefor lower premium business. To ensure that we cater for the fulladvice market we will be launching a new "non-stakeholder" pensionearly in 2005 with a charging structure designed to support fulladvice.
"The commission changes we are making reflect the lower levelsof advice and costs of the proposed basic advice regime but at thesame time will ensure that Norwich Union’s individualstakeholder pensions continue to be available."
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Notes to Editors
* From April 2005, stakeholderpension charges for new policies will be a maximum of 1.5% p.a. forthe first 10 years and then a maximum of 1% p.a. thereafter.
- Norwich Union is the UK's largest insurer. It is the UK'slargest provider of life, pensions and investment products and oneof the leading IFA providers. IFAs provide around 75% of thecompany's long-term savings business in the UK. Norwich Union hasstrategic alliances with building societies and other leading UKbrand names including Tesco Personal Finance and The Royal Bank ofScotland Group. Norwich Union’s news releases and aselection of images are available from Aviva's internet presscentre at www.aviva.com/media