Who is it for?
Retirement Account: Target Market
Scottish Widows introduced Retirement Account following A-Day, based on a strategic review of the individual pensions market. We actively market a broad range of product solutions — including Stakeholder, Personal Pensions and our Self Invest Personal Pension – The Retirement Account — each aimed at different customer groups.
We recognise that some customers' objectives are satisfied by simple products such as Stakeholder with limited investment choice. Indeed, the FSA's Regulatory Update 64 (RU64) requires the adviser to document the reasons why "a personal pension plan is at least as suitable as a stakeholder pension scheme". This has been reinforced by the FSA more recently, including in its report on "quality of advice on pension switching" in December 2008.
Our expectation is that Retirement Account will be targeted primarily at customers with pension funds of at least £50,000 — or who expect to have a fund of that amount in the relatively short term. This is supported by the following considerations:
- The rate of service charge on Retirement Account reduces as the fund size increases. This means that its pricing will compare more favourably with the Stakeholder benchmark for larger funds.
- An attraction of Retirement Account relative to Stakeholder is its broader investment choice. This is likely to become more of an attraction to customers with larger sums to invest.
- We expect more active adviser involvement in Retirement Account business – which is likely to be viable only for clients with larger investments.
- Retirement Account is designed as a "plan for life" with streamlined transition into the Retirement Income (income drawdown) when the client retires. It is generally clients with larger funds who are recommended to consider income drawdown.
The £50,000 figure is indicative and should not be treated as a threshold entry criterion. There may be customers who have more than £50,000 to invest, who have no need for broader investment choice and where Stakeholder is the cheaper and better option. We expect the decision to become relatively more compelling as the fund size increases and indeed for larger funds, Retirement Account may actually have lower charges.
Alternatively, there may be customers with less than £50,000 to invest who place a higher value on aspects of the Retirement Account offer and may be willing to accept higher charges. The key point is to be aware of the difference in charges and to justify and document it by reference to the client's objectives.
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