Many companies are holding back, hoping that sales will pick up again automatically after the recent mis-selling scandal. The fact that many mutual insurers are selling personal pensions may be a further factor restraining a price war, it is suggested. These firms do not have shareholders so are under less pressure to kickstart the market.
The price-cutters include Equitable Life, Allied Dunbar, Legal & General, Standard Life, Norwich Union and Sun Life, says Bacon & Woodrow. New requirements this year for companies to disclose charges to potential customers have been the main prompt for the price cuts, it says. "Policy charges by the major pension providers are generally falling, probably as a result of fierce competitive pressure among the market leaders and the disclosure regulations which came into force at the start of 1995," says Andrew Warwick- Thompson at Bacon & Woodrow.
Most noticeable have been moves to reduce sales commissions at the start of the policy and spread them more evenly over a policy's life, making plans worth more sooner. But Mr Warwick-Thompson warns against reading too much into the new disclosure of policy charges. In particular, the disclosed annual management charge, typically 0.5-0.75 per cent a year, does not include all the costs of running the fund. The hidden charges - covering, in particular, the costs of buying and selling the underlying investments - could add up to 0.5 per cent a year to the costs of a policy but will vary significantly. At worst, these could be enough to turn what seems a low-charging policy into a high-charging one.
The Bacon & Woodrow survey identifies a number of best buys based on long-term performance, flexibility and charges (see table). Its comparisons include only those plans with a five-year performance record, so exclude many of the new lower-cost, flexible providers such as investment and unit trust companies. In addition, it only covers plans available on a nil-commission basis - which means that consumers can buy them through a wholly fee-based independent pensions adviser, such as Bacon & Woodrow. The recommendations also exclude with-profits policies. The firm regards the unit-linked pensions as better overall bets for all but the most cautious.
One-off payments of Standard Life Sun Life, Sun Alliance,
pounds 1,000 or pounds 5,000 a year Norwich Union Legal & General,
London & Manchester
Monthly payments Standard Life Gartmore,
of pounds 100 or pounds 200 Norwich Union Equitable Life
Serps opt-out plan, Equitable Life Sun Alliance,
maximum NI payments London & Manchester
Pension transfer of Standard Life Legal & General,
pounds 50,000 or pounds 100,000 Norwich Union Equitable Life
Source: Bacon & Woodrow. *Best-buys may change for different premium levels and if investors use a commission-charging adviser.