PlatformsMay 1 2013

Skandia: Nine in 10 clients disadvantaged without rebates

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ByMichael Trudeau

Almost nine in 10 clients would be worse off investing in funds with absolutely no rebates, Skandia has claimed, as it announced plans to launch new unbundled share classes which include unit rebates.

Skandia will refer to the new share classes as ‘unbundled’ rather than ‘clean’ because they will continue to have a rebate where possible, which the company says will be passed back to the client in the form of additional units.

This mechanism was officially sanctioned by the Financial Conduct Authority in its final rules for the sector, announced last week.

Skandia welcomed the clarifications, arguing that ‘superclean’ shares that have no rebate mechanism likely to lead to worse outcomes for the majority of clients, particularly those investing through Isas and pensions.

The company estimated that 87 per cent of clients hold either a pension or an Isa, and would be put at a disadvantage if rebates were completely abolished.

The firm went on to say Isa and pension clients that pay tax at a marginal rate of 20 per cent can access the funds 8bps cheaper with unit rebates - which reduces to 6bps once income tax has been removed - than a ‘clean’ share-class.

Peter Mann, UK managing director at Skandia, said: “Adding unbundled share classes with lower AMCs but still paying rebates where possible provides clients and advisers with a swift and positive solution to the new tax liability on rebates.

“By operating both unbundled and bundled share classes we will help keep re-registration simple without creating any unnecessary barriers for advisers and their clients. Our data show just how many clients hold ISAs and pensions as part of their portfolio, and other providers who choose not to develop their systems to administer unit rebates risk not acting in the client’s best interest.”