AEGON SCOTTISH EQUITABLE 5 FOR LIFE PLAN
What is it? A unit-linked offshore investment plan that allows savers to invest a lump sum and secure a guaranteed income for life from age 60.
How does it work? Savers put in a minimum of £15,000, which is invested in a bond fund and a tracker fund. There are different mixes available, ranging from 40 per cent to 60 per cent in bonds. There is also an element of life cover that provides a death benefit and allows the withdrawal of up to 5 per cent of the original investment each year.
What are the plus points? The life policy element means that the plan falls under the umbrella of the Financial Services Compensation Scheme.
What is the downside? Caroline Hawkesley, of Evolve Financial Planning, the independent financial adviser, says: “The setting-up charge can be as much as 1.5 per cent a year for five years. Most of this pays commission to advisers, who can receive as much as 7.5 per cent upfront.
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“There is also an annual charge on the bond fund and tracker fund of between 1.55 per cent and 2.25 per cent. This is very high when you consider that many bond and tracker funds have annual charges of 1 per cent or less.”
Miss Hawkesley adds that the plan is not very tax-efficient and the proud claim that savers can receive 5 per cent for life is not so special when you consider that ordinary annuities promise as much if not more.
The verdict
Thumbs down. Miss Hawkesley says: “The charges are too high and there are better alternatives to be found elsewhere.”