Finance by Phone: A pension plan on the other end of the line Confident ring changes with phone pension

Time is money, as the saying goes, so it makes sense to consider the advantages of telephone services whether
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The Independent Online
Telephone pensions are the latest fad. Despite initial concerns that this was a product too complicated to be bought by phone, the direct pensions market has proved popular.

Several companies have launched services this year including Virgin Direct, Save & Prosper, Sun Life and Colonial Direct. Others, such as Commercial Union and Legal & General, are looking into it.

The success of direct pensions has been put down to convenience and cost. Many operators keep their lines open in the evening and at weekends, allowing people to call at their convenience. Some just prefer to deal with their financial affairs over the phone. Face-to-face meetings can be intimidating and many prefer the anonymity. As Nigel Emery, pensions marketing manager at Save & Prosper, says: "If you don't feel comfortable with what you are being told you can always put the phone down."

Going direct can also be cheaper. By cutting out the middleman and not having to pay advisers commission for introducing business, the direct providers are able to offer pensions more cheaply. For people who do not want or do not need advice this clearly is a bonus.

Having said that, many direct pension providers do provide some free financial advice over the phone, including Virgin Direct, Save & Prosper, Scottish Widows and Colonial Direct. While they only talk about their own range of pension products, they will give advice on whether their products are right for you, which funds you should invest in and how much you should invest.

Typically, you will be sent details of the pension and then you will speak over the telephone to a fully qualified adviser. The adviser will carry out a fact-find on you, asking questions to ensure which pension is the most suitable. You will be told how large a pension you can expect if you invest an agreed amount each month and there will then be some time for you to think before taking the plunge.

Direct pension providers will usually offer two types of pensions: personal pensions for the self employed or people who are not members of an employer's occupation pension scheme, and additional voluntary contribution schemes for those in occupational schemes who want to boost their pensions. A few providers, such as Scottish Widows and Merchant Investors, also offer an executive pension for company directors.

Not all direct pension providers give advice. Marks & Spencer, for example, believes its pension is so easy to understand there is no need. Its telephone operators carry out a mini screening process when people contact them. If you already have a pension, or your employer is running a scheme, Marks & Spencer advises you to contact an independent financial adviser (IFA). Other providers, such as Foreign & Colonial, Sun Life, Merchant Investors and Fleming Investment Trust Management also operate an execution- only service and will refer callers to an IFA if they want advice. They have found that many of their callers are very knowledgeable, know what they want and so do not see any point in paying for advice.

To keep it simple, direct pension providers such as Virgin Direct and Marks & Spencer offer a straight personal pension or additional voluntary contributions scheme with no choice of funds to invest in. But other providers offer a range of funds that investors can choose between. To help them, providers will give advice on the funds or supply details of how and what the funds invest in, in the client's risk profile.

Direct pensions are not for everyone. Many people will prefer to discuss financial arrangements as complex as pensions face-to-face with an adviser. But for those who are just as happy to discuss their finances over the phone as in person, the direct services offer yet another choice.

q Virgin Direct, 0345 959595; Marks & Spencer, 0800 363420; Foreign and Colonial, 01722 320102; Save & Prosper, 0800 829100; Sun life, 0345 322223; Colonial Direct, 0800 828525; Merchant Investors, 0500 374857; Fleming, 0505 500324; Scottish Widows, 0345 678910.