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.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
sportDidier Drogba returns to Chelsea on one-year deal
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookA wonderful selection of salads, starters and mains featuring venison, grouse and other game
Sport
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
football
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
Sport
Rhys Williams
commonwealth games
News
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
i100
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Travel
travel
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
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.

ES Rentals

    iJobs Job Widget
    iJobs General

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    Commercial Litigation Associate

    Highly Attractive Package: Austen Lloyd: CITY - COMMERCIAL LITIGATION - GLOBAL...

    Systems Manager - Dynamics AX

    £65000 - £75000 per annum + Benefits: Progressive Recruitment: The client is a...

    Service Delivery Manager (Software Development, Testing)

    £40000 - £45000 per annum: Ashdown Group: A well-established software house ba...

    Day In a Page

    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
    10 best reed diffusers

    Heaven scent: 10 best reed diffusers

    Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
    Commonwealth Games 2014: Female boxers set to compete for first time

    Female boxers set to compete at Commonwealth Games for first time

    There’s no favourites and with no headguards anything could happen
    Five things we’ve learned so far about Manchester United under Louis van Gaal

    Five things we’ve learned so far about United under Van Gaal

    It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
    Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

    Beyoncé poses as Rosie the Riveter

    The wartime poster girl became the ultimate American symbol of female empowerment
    The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

    The quest to find the perfect pair of earphones

    Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
    US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

    Meet the US Army's shooting star

    Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform