Norwich Union is offering a with-profits fund with a capital guarantee as part of its stakeholder ...
Norwich Union is offering a with-profits fund with a capital guarantee as part of its stakeholder product amid claims that it could weaken the returns of non-stakeholder members and weaken the position of the company as a whole.
Norwich Union's product offers a with-profit fund as an investment option for its stakeholder pension product. The group claims it will be able to guarantee the fund in the event of insolvency because of the size of Norwich Union. Standard Life is also offering with-profit stakeholder products but it does not feature a capital guarantee.
It is argued that companies would be unable to put up an adequate level of guarantee without using non-stakeholder funds and that the product would be inferior to other types of with-profit offerings on the market. Nigel Stammers, pensions strategy manager at Clerical Medical said: "Offering an adequate level of guarantee would be impossible without using existing with-profits funds to subsidise it. This subsidy could lead to inferior performance for clients already holding with-profits pensions, and confusion about what the different products offer."
But Norwich Union claimed that its product would not need to draw on the investments of its non-stakeholder clients because the assets will be ring-fenced.
Ian Buckle, head of individual pensions at Norwich Union, said: "We have the resources to back it up, I think it is sour grapes on the part of certain providers who don't feel they can offer this product.
"We can use our assets to underwrite the policy and there will be a different smoothing policy from other with-profits products as well as a market value reduction adjuster in the case of poor market performance."
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