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.

Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths surrounding the enigmatic singer
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Sport
Christian Benteke of Aston Villa celebrates scoring the winner for Aston Villa
football
News
Bill O'Reilly attends The Hollywood Reporter 35 Most Powerful People In Media Celebration at The Four Seasons Restaurant on April 16, 2014 in New York City
media It is the second time he and the channel have clarified statements
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

    Recruitment Genius: Lettings and Sales Negotiator - OTE £46,000

    £16000 - £46000 per annum: Recruitment Genius: This is an opportunity to join ...

    Recruitment Genius: Home Care Worker - Reading and Surrounding Areas

    £9 - £13 per hour: Recruitment Genius: This is a great opportunity to join a s...

    Recruitment Genius: Key Sales Account Manager - OTE £35,000

    £25000 - £35000 per annum: Recruitment Genius: Have you got a proven track rec...

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn