Personal Finance: Nic Cicutti's column

Norwich Union is sticking its neck out and opting for value over high charges

ONE DAY in the not-too-distant future, millions of investors may have a lot to thank Norwich Union for.

The company has just issued a booklet called Exploding the Myths, in which it discusses the new Individual Savings Account and how to obtain good value from your investment.

Unlike all other guides to ISAs, the Norwich Union booklet is not big on the precise details of how much you can put into one type of fund as opposed to another.

No, its main aim is to debunk the argument, now prevalent among the majority of UK fund managers, that the Treasury's CATmarks, designed to ensure that investors get good value from their savings, do not deliver what they set out to do.

The CAT initials stand for fair Charges, easy Access to your money and decent Terms and conditions. From the charges perspective, this means paying no initial fee and an annual levy thereafter of no more than 1 per cent. By contrast, funds will take a 5 per cent initial charge and 1.5 per cent in annual fees: which means that the first year, 6.5 per cent of your initial investment is swallowed up in management costs.

The Norwich Union booklet is quite explicit on what this means: "On an ISA investment of pounds 7,000 [in the first year of the new regime] that's pounds 385 extra that a fund needs just to make up the difference. And each year, the gap keeps growing larger."

Do funds make up that difference? According to Norwich Union, the answer is negative. In fact, to put that 1 per cent anual charge in perspective, less than 3 per cent of European equity funds and 1 per cent of UK equity funds have managed to outperform the rest of their average peer group by more than 1 per cent every year for the last five.

Equally important, Norwich Union offers not only the usual range of ultra- cheap tracker funds (so do quite a few other fund managers, as it happens), but also a small selection of actively managed funds.

In other words, the company is effectively demonstrating that if you want a fund manager to make daily decisions on portfolio allocation, based on his understanding of world and UK equity markets, it is perfectly possible to do so and still charge 1 per cent or less a year. Norwich Union is putting its money where its mouth is: out of 26 CAT-standard ISAs, it is marketing seven of them, six either actively managed or bond-based.

It is too soon to say whether this particular marketing experiment will work. But in so far as Norwich Union is one of a handful of companies prepared to stick its neck out and opt for value over high charges, it deserves to, as does the other small band of CAT-standard providers. By the way, free copies of Exploding the Myths are available by calling 0800 0562450.

JUST TWO more quick points. First, congratulations to Chris and Andrea Masters who have ended up in La Cretouffiere, a 17th-century French hamlet - and with a mere pounds 2,000 mortgage. They are also the latest quarterly winners of our Stepping Stones competition. This week's entry is featured on page 9; if you would like to take part, write in to the address shown there.

Finally, to the scores of readers who sent letters expressing sympathy for the loss of my pet hamster, Snowy, and urging me to continue my appeal against the Inland Revenue, many thanks. I am appealing. More on that subject when I return from my holiday in two weeks.

Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookA delicious collection of 50 meaty main courses
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

SPONSORED FEATURES

ES Rentals

    iJobs Job Widget
    iJobs General

    Tradewind Recruitment: Permanent Class Teachers Required for 2015/2016 - Suffolk

    £21000 - £50000 per annum: Tradewind Recruitment: Class Teachers seeking perma...

    Tradewind Recruitment: Class Teachers Required in Norwich and Great Yarmouth

    £20000 - £45000 per annum: Tradewind Recruitment: I am working on behalf of a ...

    Tradewind Recruitment: Graduate - Newly Qualified Teachers Required For Sept 2015

    £21000 - £50000 per annum: Tradewind Recruitment: Graduate Teachers/ Newly Qua...

    Tradewind Recruitment: Graduate - Newly Qualified Teachers Required For Sept 2015

    £21000 - £50000 per annum: Tradewind Recruitment: Graduate Teachers/ Newly Qua...

    Day In a Page

    Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

    Solved after 200 years

    The mysterious deaths of 3,000 soldiers from Napoleon's army
    Every regional power has betrayed the Kurds so Turkish bombing is no surprise

    Robert Fisk on the Turkey conflict

    Every regional power has betrayed the Kurds so Turkish bombing is no surprise
    Investigation into wreck of unidentified submarine found off the coast of Sweden

    Sunken sub

    Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
    Instagram and Facebook have 'totally changed' the way people buy clothes

    Age of the selfie

    Instagram and Facebook have 'totally changed' the way people buy clothes
    Not so square: How BBC's Bloomsbury saga is sexing up the period drama

    Not so square

    How Virginia Woolf saga is sexing up the BBC period drama
    Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

    Still carrying the torch

    The seven teenagers given our Olympic hopes
    The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

    The West likes to think that 'civilisation' will defeat Isis...

    ...but history suggests otherwise
    The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

    The bald truth

    How thinning hair made me a Wayne Rooney sympathiser
    Froome wins second Tour de France after triumphant ride into Paris with Team Sky

    Tour de France 2015

    Froome rides into Paris to win historic second Tour
    Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

    A new beginning for supersonic flight?

    Concorde's successors are in the works 15 years on from the Paris crash
    I would never quit Labour, says Liz Kendall

    I would never quit party, says Liz Kendall

    Latest on the Labour leadership contest
    Froome seals second Tour de France victory

    Never mind Pinot, it’s bubbly for Froome

    Second Tour de France victory all but sealed
    Oh really? How the 'lowest form of wit' makes people brighter and more creative

    The uses of sarcasm

    'Lowest form of wit' actually makes people brighter and more creative
    A magazine editor with no vanity, and lots of flair

    No vanity, but lots of flair

    A tribute to the magazine editor Ingrid Sischy
    Foraging: How the British rediscovered their taste for chasing after wild food

    In praise of foraging

    How the British rediscovered their taste for wild food