M&S to start selling insurance and pensions off the shelf

FROM 10 May, Marks & Spen- cer Financial Services, the finance arm of the department store chain, will start selling life insurance and pensions policies with its existing business promoting credit cards, personal loans, unit trusts and PEPs.

Customers will be able to pick up a brochure in the stores, but - initially at least - the policies and plans will be available only by direct mail.

In the interests of simplicity just two protection plans will be marketed at first, a Family Protection Plan to provide a high level of life assurance cover for a specifed but extendable period, and a Serious Illness Plan to provide a lump sum in the event of a critical illness. In both cases, the premiums will be automatically adjusted to help compensate for the effects of inflation and reduce the need for continuous monitoring of the amount of protection offered.

Only one investment and two pension plans will be offered initially. Contributions to the investment plan are invested in shares, but as cautiously as possible. A small part of the monthly contributions to the Savings and Protection Plan will be used to pay for life cover and the balance will be invested in a newly established Marks & Spencer UK Balanced Equity Fund, which is designed to "track" the FT-SE 100 share index.

In order to guard against a possible repeat of the 1987 stock market crash, however, the dividend income will not be reinvested in the fund but will be used to buy options to help protect the fund against sharp falls in share prices.

The plan will have a 10-year life and will pay out the minimum sum assured or the value of the investments, whichever is the greater, on death or diagnosis of a terminal illness within the lifetime of the plan.

There will also be a Personal Pension Plan and a Supplementary Pension Plan. Contributions will be invested in units in one of three unit trust funds with differing degrees of risk, depending on the length of time the individual customer has left to go until retirement. Once in, customers can switch from one fund to another as they wish.

All the new plans offer a 30-day cooling-off period for customers to change their minds after signing up. But the policies will be sold "off the shelf" and M&S will not give financial advice, after taking a conscious decision that its customers prefer to make their own decisions. Customers and the company itself will be relying heavily on the M&S tradition of quality and value to assure them that the products are as safe and straightforward as possible and are explained in simple terms that ordinary people can understand and assess.

The decision to enter the market comes just as the question of compensation for several hundred thousand people persuaded against their best interests to switch out of company pension schemes and buy personal pension plans has come back into the public eye.

The Personal Investment Authority is pushing for compensation for the 350,000 worst- affected by the end of this year, including all investors who have since died or retired, and older people who were worst affected by being persuaded to opt out of occupation pensions. But according to the Consumers' Association, pension managers could refuse to reinstate investors who were persuaded to leave established pension schemes, making the question of compensation much more complex and costly.

This is quite apart from the argument over who should pay for compensation when it is agreed - shareholders in quoted insurance companies or the other policyholders. The continuing wrangle is the worst possible background from which to launch new efforts to sell private pension and insurance schemes.

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