UK life and pensions provider Norwich Union – part of Aviava – has been reviewing its individual pensions strategy throughout 2004 to see how it needs to develop and refine its product range and pricing strategy to respond to the changing market dynamics.
Following the Treasury announcement in June, of an increase in the stakeholder price cap from 1% to 1.5% a year from April 2005, together with a proposed basic advice regime, Norwich Union says it is still insufficient to fund the full financial advice process for lower premium business.
To cater for customers who wish to seek full financial advice on pensions, the company will be launching a new ‘non-stakeholder’ pension product in early 2005 with a charging structure designed to support the provision of full advice. This new product will offer greater choice than stakeholder, including a wider range of funds.
To reflect the lower level of advice and costs of the basic advice regime on stakeholder pensions, Norwich Union is reducing the levels of commission on regular premium individual stakeholder priced pensions, by two thirds. The changes are effective from 4 October 2004. Group stakeholder pension products will remain unchanged.
Norwich Union intends to keep a strong foothold in the individual pensions market but its main focus will continue to be the group pensions market.
The charging structure for existing Norwich Union stakeholder customers remains unchanged.
“We believe that financial advice is essential to encourage people to save and therefore help the pension market grow,” says Peter Hales, sales & marketing director at Norwich Union. “While the new stakeholder pension cap should support the basic advice process, it will not be sufficient to fund full advice for lower premium business. To ensure that we cater for the full advice market we will be launching a new non-stakeholder pension early in 2005 with a charging structure designed to support full advice. The commission changes we are making reflect the lower levels of advice and costs of the proposed basic advice regime but at the same time will ensure that Norwich Union’s individual stakeholder pensions continue to be available.”