New Ireland life assurance group plans to launch a new pension product this week which will allow customers to pick the shares in their own retirement funds. The move is a response to demand from pension brokers and customers who want more involvement in deciding the content of their retirement funds. The intention is to allow policyholders to decide what shares are bought with the funds they invest each year in their pension plan.
New Ireland director Mr Dermot Murray said pension customers can decide where some or all of the annual payments into their plan is invested. The new product is aimed at self-employed and company directors who can get tax relief on investments in personal pension plans. Tax relief is available each year on investments of between 15 and 30 per cent of income, with the relief scaled according to the age of the investor. Payments into pension funds can be made through regular premiums or once-off lump sums called single premiums. Many of these pension fund investors make lump-sum payments before January 31st each year to ensure maximum annual tax relief.
The single premium pension market is growing rapidly. In the first six months of 2000, £318 million was invested in the single premium pension market. Industry sources expect the market will soon be worth £1 billion on a full-year basis. Under most pension plans the premiums paid in by the customer are allocated to a variety of managed funds which are in turn invested in portfolios of shares, property and government bonds.
Under the new Personal Portfolio Plan, New Ireland customers who are comfortable with making their own investment decisions or who want more control over where their funds are invested will be directed to Davy Stockbrokers. New Ireland has made an arrangement with Davy whereby New Ireland customers can avail of investment advice or an execution (share buying) only service from the stockbrokers. There will be no extra charge to customers for the service, according to Mr Murray. New Ireland will share its existing management fee of 1 per cent with Davy, he said. Both companies are owned by Bank of Ireland.
New Ireland customers who already have built up pension savings in managed funds will be able to switch some of their funds into self-selected equities under the new plan, Mr Murray explained.
"Life companies need to be more flexible to meet the needs of customers and potential customers who want a bigger say in their financial planning decisions and who are knowledgeable about shares and stock markets," Mr Murray said. Most customers are likely to opt to channel some of their funds into the self-select option and the balance into the more traditional, managed funds, he predicted.
