Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies, nor can we guarantee to answer letters We accept no legal responsibility for advice given.. mazing what a bit of arm-twisting can do. Journalists have been bleating on for years about rip-off personal pensions - and the public have carried on buying them (perhaps thinking that you shouldn't believe what you read in the papers - shame on you). It took an edict from the Personal Investment Authority (PIA) to sort out many of these problems - in three weeks flat. The statement demanded that anyone who buys a personal pension from now on will not be penalised ("materially disadvantaged" in the PIA's words) if they want to swap to a new stakeholder pension scheme from 2001 onwards. Charges on stakeholder plans are likely to be capped by the Government at 1 per cent a year.The PIA statement marked the beginning of the end of the pensions industry as we know and hate it.
A slew of big names, including Norwich Union, Allied Dunbar and Friends Provident, have already dropped their traditional policies, which take commission and charges upfront. These schemes erode the value of your pension for several years, making them useless for people who might want to swap to a stakeholder deal.Suddenly, the life companies feel able to provide more attractive pensions. They have slashed commission rates and offer "level load" policies, where charges are paid every month over the life of the pension rather than being concentrated upfront. But many of these deals are not what you'd call cheap - a pension firm could still take pounds 10 for every pounds 100 you invest.And you won't ever get that back so, in fact, you have been "materially disadvantaged" by buying a personal pension now rather than (say) investing in a low-cost individual savings account (ISA) and then swapping that lump sum to a stakeholder pension in 2001.Among the giant life insurers only Legal & General has spotted this problem.
It has said it will refund the difference between current charges on its personal pension (5 per cent of each contribution, a 0.5 per cent management fee and a pounds 1.50 per month fee) and stakeholder costs. The downside is that customers won't get the extra cash until they swap to a stakeholder, pension and so will miss out on the compound growth on that money. But even if it's not as good as charging less from day one, at least it's a start.n i.berwick independent.co.uk. Individual Savings Accounts (ISA) have finally gone on sale and everyone is banging on about tax-free cash savings and stock market investments. But there has been no big noise made about the life insurance provision of ISAs.
Only a handful of providers are currently offering ISAs combined with life insurance policies. Many people feel insurance-linked investment is an outdated and expensive way to save money - because of commission paid to salesmen or financial advisers - and the life insurance component in the ISA plans was a bit of a shock. So why is it there? The Treasury says it was for the sake of completeness. However, other sources suggest life insurance crept into the proposals as a result of highly effective lobbying of MPs by friendly societies - much the the Treasury's annoyance. The life insurance ISA market includes three friendly societies: Family Assurance, Scottish Friendly Assurance and Tunbridge Wells Equitable. Others are expected to enter the fray soon.Combining the insurance ISA allowance with the individual annual allowance for tax-free investment in a friendly society fund adds up to pounds 1,270.Some insurance giants, including Standard Life, have not launched an insurance ISA. But Abbey National, AXA Sun Life, Co-operative Insurance, Norwich Union, Pearl and Scottish Amicable have gone ahead.Most are offering investment in their with-profits funds. These are the traditional offerings from life companies (an endowment policy is invested in a with-profits fund).Their fall from grace over the past decade has been spectacular.
The image of a safe investment linked to the stock market has faded. We now see these contracts as inflexible, high-charging deals sold by commission- hungry salespeople. Returns from with-profits investments have declined and are likely to remain depressed. And yet the slightest wobble on the stock market appears to ensure a rush to the with-profits bond. Some pounds 6bn were sold last year.Most of the ISAs are straightforward with-profits savings schemes placed in a tax-free ISA wrapper. Norwich Union is promoting a version of its mini-insurance ISA as a mortgage repayment vehicle called Homesaver. NU has taken its insurance mini ISA and just strapped a term life assurance policy onto it.