Norwich Union today announces details of its new personal pension designed to support the full financial advice process.
Changes to individual stakeholder pensions fund range
Norwich Union today announces details of its new personal pension designed to support the full financial advice process. The new pension product will be available from 13 December 2004 and will give customers the choice as to whether they pay for their financial advice through fees, commission or a combination of both.
The new "non-stakeholder" product will give customers access to a wide range of investment funds with 29 Norwich Union funds including six socially responsible investment (SRI) funds and three fund of funds as well as 34 external funds from eight fund managers.
The new pension product will have the following charges:
- Up to 1% annual fund charge. An additional annual charge ranging from 0.1% to 0.9% will apply to external funds and funds of funds*. A large fund discount applies to investments of: Ł10,000+ (0.10% reduction), Ł30,000+ (0.15% reduction) and Ł50,000+ (0.20% reduction)
- On regular payments, a charge of 10% on the first five years’ payments, or a charge of 20% on the first two years’ payments. There is no initial charge on lump-sum investments.
With this new pension, customers now have the choice of paying a fee to their adviser rather than paying for the advice they receive through commission paid to the adviser on the product sale. Customers who choose this option will see a reduced annual fund charge for both regular payments and lump sum investments.
This new pension and its charging structure is entirely consistent with the forthcoming "menu" approach, which will allow customers to clearly see the cost of advice in a transparent way. Additionally, IFAs will have the option of advice being paid for by fee.
The new charging structure for commission-based advice equates to reduction in yields for Norwich Union selected funds that are broadly comparable with the new charging structure for stakeholder pensions, which become effective in April 2005. The following examples show the reduction in yields for regular payment and single payment business (see notes to editors for assumptions):
| Investment | Term (yrs) | Stakeholder RIY% | Non-stakeholder RIY% |
| Ł200 per month | 10 | 1.6 | 2.0 |
| Ł200 per month | 20 | 1.2 | 1.2 |
| Ł200 per month | 30 | 1.1 | 1.0 |
| Ł25,000 lump sum | 10 | 1.6 | 0.9 |
| Ł25,000 lump sum | 20 | 1.3 | 0.9 |
| Ł25,000 lump sum | 30 | 1.2 | 0.9 |
Changes to individual stakeholder fund range
Norwich Union is also reducing the number of funds on its individual stakeholder pension product to simplify it and support the basic advice regime for stakeholder pensions. The fund range will be limited to: stakeholder with-profit, balanced managed, retirement protection and deposit. The changes also take effect from 13 December 2004.
The charging structure and fund structure for existing Norwich Union stakeholder customers remains unchanged.
Iain Oliver, Norwich Union’s head of pensions, said: "Our research shows that customers find planning for retirement a complex process and need the help of an adviser. We believe customers should take the appropriate level of financial advice for their retirement planning to suit their individual needs. Our new pension product ensures that we continue to cater for the full advice pension market and those clients who go down this route. In addition, the flexibility of the charging structure enables clients to select whether they pay for the advice they receive through fees, commission or a combination of both.
"We believe that the provision of financial advice is an essential factor in providing customers with the confidence to save for the longer term and to grow the pensions market."
-ends
Press office contacts:
James Evans 01904 452791 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 non stakeholder pensions, are calculated using a two year initial charging period, a 1% annual fund charge and a large fund discount where applicable. The reduction in yield figures are based on Norwich Union funds ie with no external fund charge.
- Stakeholder figures are generically calculated using the new charging structure effective from April 2005 of 1.5% annual fund charge for the first 10 years and then 1% per annum thereafter. Stakeholder does not include a large fund discount. Growth rates of 7% have been assumed
- Norwich Union is the UK's largest insurer. It is the UK's largest provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company's long-term savings business in the UK
- Norwich Union has strategic alliances with building societies and other leading UK brand names including Tesco Personal Finance and The Royal Bank of Scotland Group. Norwich Union’s news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.