New Ireland is targeting customers willing to save the maximum £200 (€254) allowed per month through its charging structure for its new products under the Special Savings Incentive Scheme.
Under its charging structure the life assurer is offering brokers an opportunity to reduce the entry cost to savers by reducing their amount of commission.
The charging structure will involve a "premium charge" or entry charge of 5 per cent and an annual management fee of 1.65 per cent. For savers who put in £200 per month this premium charge will be reduced to 4 per cent.
The entry charge will be applied to each monthly payment - £10 per month for a saver saving £200 per month. It will be applied by reducing the amount invested for that saver to £190 per month. The entry charge for someone saving £60 per month would be £3 per month over the five years of the plan.
But brokers can cut this entry fee for savers by reducing the amount of commission they take. Where brokers opt to take no commission, the premium charge for savers will fall to 1 per cent - reducing the monthly charge from £10 to £2 per month for someone saving £200 per month.
If brokers agree to halve either the once-off standard commission of 15 per cent of the annual amount saved in the first year or the 4 per cent commission on each monthly sum saved, the entry charge for savers will fall to 3 per cent. New Ireland said that brokers could decide to opt for nil commission and either deal with clients on a fee basis or sell the products as loss leaders aimed at getting new clients or retaining existing ones.
New Ireland has set a minimum premium of £60 per month - the minimum saving set by the Government is £10 per month.
New Ireland is offering savers a range of five funds. One option is a fund that carries a guarantee their own contributions will be returned after five years. The guarantee does not cover the Government subsidy of £1 for every £4 saved, which is added to those contributions over the five-year period as long as the account is maintained for five years.
Half of the funds of savers who opt for the guarantee will be invested in global equities and the other half will go into a fixed-interest fund. The scheme comes into effect on May 1st and is open to residents in the Republic aged over 18 years. Financial institutions are expected to compete aggressively in the coming weeks for savers, particularly at the top end of the market. Since each individual can have only one account, savers need to assess the full range of products on offer before opening an account. Savers have until April 20th, 2002, to open an account.
