Mellon Trust continues to defy the conventional wisdom that the 1 per centexpenses cap means nobody can make money out of stakeholder pensions. Having secured stakeholder administration business from the Nationwide Building Society already, Mellon Trust has now added an outsourcing mandate from Direct Line Life. This means the American trust bank has won two out of the five outsourcing contracts to have come to market so far.
Of the others, all have gone to life offices: Invesco has appointed Scottish Life; Merrill Lynch Investment Management AMP; and Deutsche Asset Management Winterthur.
But Mellon reckons its lack of any conflict of interest and a bundledservice offering – it already offers both custody and fund adaministrationto fund managers – will give it the edge over the competition. In addition to Stakeholder administration for Direct Line, Mellon will be undertakinginvestor servicing for Direct Line, including ISA administration, fund accounting, and global custody for Direct Line Unit Trusts Limited, the savings and investment arm of Direct Line.
“Direct Line has taken a long hard look at the prevailing investmentclimate, and has taken the strategic decision to outsource all itsadministrative functions to a single provider,” said Conor Hoey, Head ofPensions New Business at Mellon Trust. “Mellon’s ability to handleStakeholder administration was critical in our being awarded this business.”
“It is our firm belief that pensions providers will increasingly look tothird party administrators to work within the 1% cap on Stakeholder charges. Direct Line has gone a step further by entering this unique bundled outsourcing arrangement with Mellon.”
Duncan MacKechnie, Managing Director of Direct Line Life, added: “We chose Mellon Trust for the simple reason that they had the capability to service all our requirements to a high specification from day one of our re-launch. As one of the UK’s leading providers of general insurance, with a brand strength that many in the industry would die for, we believe thatretail fund and Stakeholder products will appeal naturally to our corecustomer base. We look forward to this strategic partnership with Mellonworking for the ultimate benefit of our customers.”
Who knows? Mellon Trust could be pioneering the a US-style defined contributin pension record-keeping business in the United Kingdom.