New personal pension for full advice

Article date: 18 November 2004

Changes to individual stakeholder pensions fundrange

Norwich Union today announces details of its new personalpension designed to support the full financial advice process. Thenew pension product will be available from 13 December 2004 andwill give customers the choice as to whether they pay for theirfinancial advice through fees, commission or a combination ofboth.

The new "non-stakeholder" product will give customers access toa wide range of investment funds with 29 Norwich Union fundsincluding six socially responsible investment (SRI) funds and threefund of funds as well as 34 external funds from eight fundmanagers.

The new pension product will have the following charges:

  • Up to 1% annual fund charge. An additional annual chargeranging from 0.1% to 0.9% will apply to external funds and fundsof funds*. A large fund discount applies to investments of:£10,000+ (0.10% reduction), £30,000+ (0.15% reduction) and£50,000+ (0.20% reduction)
  • On regular payments, a charge of 10% on the first fiveyears’ payments, or a charge of 20% on the first twoyears’ payments. There is no initial charge on lump-suminvestments.

With this new pension, customers now have the choice of paying afee to their adviser rather than paying for the advice they receivethrough commission paid to the adviser on the product sale.Customers who choose this option will see a reduced annual fundcharge for both regular payments and lump sum investments.

This new pension and its charging structure is entirelyconsistent with the forthcoming "menu" approach, which will allowcustomers to clearly see the cost of advice in a transparent way.Additionally, IFAs will have the option of advice being paid for byfee.

The new charging structure for commission-based advice equatesto reduction in yields for Norwich Union selected funds that arebroadly comparable with the new charging structure for stakeholderpensions, which become effective in April 2005. The followingexamples show the reduction in yields for regular payment andsingle payment business (see notes to editors for assumptions):

Investment

Term (yrs)

Stakeholder

RIY%

Non-stakeholder

RIY%

£200 per month

10

1.6

2.0

£200 per month

20

1.2

1.2

£200 per month

30

1.1

1.0

£25,000 lump sum

10

1.6

0.9

£25,000 lump sum

20

1.3

0.9

£25,000 lump sum

30

1.2

0.9

Changes to individual stakeholder fund range

Norwich Union is also reducing the number of funds on itsindividual stakeholder pension product to simplify it and supportthe basic advice regime for stakeholder pensions. The fund rangewill be limited to: stakeholder with-profit, balanced managed,retirement protection and deposit. The changes also take effectfrom 13 December 2004.

The charging structure and fund structure for existing NorwichUnion stakeholder customers remains unchanged.

Iain Oliver, Norwich Union’s head of pensions, said: "Ourresearch shows that customers find planning for retirement acomplex process and need the help of an adviser. We believecustomers should take the appropriate level of financial advice fortheir retirement planning to suit their individual needs. Our newpension product ensures that we continue to cater for the fulladvice pension market and those clients who go down this route. Inaddition, the flexibility of the charging structure enables clientsto select whether they pay for the advice they receive throughfees, commission or a combination of both.

"We believe that the provision of financial advice is anessential factor in providing customers with the confidence to savefor the longer term and to grow the pensions market."

-ends

Press office contacts:
James Evans 01904452791 Out of hours 07800 699525
Louise Soulsby 01904 452617 Out of hours 07800 699526
David Gwyer 01904 452828 Out of hours 07800 699508
Rob Pell 01904 452659 Out of hours 07800 699563

Notes to editors:

* The reduction in yield figures in the table, for the nonstakeholder pensions, are calculated using a two year initialcharging period, a 1% annual fund charge and a large fund discountwhere applicable. The reduction in yield figures are based onNorwich Union funds ie with no external fund charge.

  • Stakeholder figures are generically calculated using the newcharging structure effective from April 2005 of 1.5% annual fundcharge for the first 10 years and then 1% per annum thereafter.Stakeholder does not include a large fund discount. Growth ratesof 7% have been assumed
  • 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 has strategic alliances with building societiesand other leading UK brand names including Tesco Personal Financeand The Royal Bank of Scotland Group. Norwich Union’s newsreleases and a selection of images are available from Aviva'sinternet press centre at www.aviva.com/media.

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