Only two of some 23 investment products offered by financial institutions under the Government Special Savings Incentive Scheme have been awarded the Consumer Association of Ireland (CAI) kitemark. Some 21 investment accounts were rejected because the entry/ exit or other charges imposed were deemed too high by CAI or because the minimum monthly contributions required to participate were too high.
Deposit-type accounts fared better with the kitemark awarded to 15 out of 23 accounts assessed.
To secure the kitemark, investment-type accounts could not have policy fees, entry charges or bid offer spreads. A maximum annual management charge of 1.5 per cent was allowed while accounts had to accept £40 per month as the minimum contribution.
On this basis only EBS and Quinn Life were awarded the kitemark. Both the EBS Special Savings Incentive Scheme personal investment plan and Quinn Life's freeway have minimum monthly contributions of £40. Quinn Life has a 1 per cent annual management charge compared with 1.5 per cent at EBS. Quinn Life is offering index tracker funds - tracking stock market performance based on the Eurostoxx 50, the ISEQ top20 and a Eurobond mix. EBS is offering balanced, growth and global equities managed funds.
Because EBS and Quinn Life sell directly to consumers, unlike some of the other suppliers who sell through brokers, they do not have to pay commission. This is a cost to financial institutions which they generally recoup through charges to the customer. Of the financial institutions which failed to get kitemark Irish Life was rejected because its entry charge (5 per cent), annual management charge (1.65 per cent) and minimum monthly contribution level (£98.45) were all too high. Last week Irish Life announced a modification - "Saver Scope" investors would get a bonus of 2.5 per cent of the value of their fund at the end of five years, up from the 1.25 per cent announced earlier. Hibernian failed to get the kitemark because it has a policy fee (£1.18) and its annual management/administration charge (2 per cent) is above the CAI criteria. Ark Life was rejected because its minimum contribution (£80) was too high and it has a 3 per cent entry cost.
For deposit accounts, the CAI criteria required that a minimum contribution of £10 per month be accepted, with no account fees, variable interest rates staying within one percentage point of the European Central Bank Rate, no breakage penalties on fixed rate accounts and seven day access to the funds.
On deposit accounts the kitemark was withheld from accounts that did not accept the minimum contribution of £10 per month. On this basis Northern Rock was not awarded a kitemark for its account which offers the best interest rate available - the ECB rate of 4.75 per cent. To get this rate Northern Rock requires the account holder to save £200 per month. There is a serious sting in this account - if savings in any one month fall below £200 the interest rate on all the savers funds falls to ECB less one per cent, currently 3.75 per cent. But for a saver confident they can meet the 60 contributions of £200 over the five-year term this product is, with ACCBank, the best on the market, through it does not have the kitemark.
