The 'fund supermarket' style linked funds available for Scottish Widows products are to be closed. For example, if you invested in a Scottish Widows pension, you can choose from the range of Scottish Widows funds as well as a range of other companies funds. So, if you were not happy with Scottish Widows or another provider, then you could just switch to a different manager.
Scottish Widows say the move is due to lack of interest and low use by Scottish Widows policyholders.
Our View
Not surprising really. The concept of multi-managers is a good one offering greater choice without the need to cash in your plan or transfer it, sometimes, with penalties to another provider. The problem is cost.
As well as paying the charges of the host company, you then pay charges of the fund manager link. These are invariably costly. Some companies have offered multi-manager links for many years and have adapted their systems to reduce costs. They already have reputation for dealing in this sector and as a result have significant market share meaning that they can keep costs down.
Newer services, which many competitor providers launched, including Scottish Widows, just do not have the reputation or public awareness of such schemes and therefore, whilst they are attracting huge amounts of money into their own funds, clients are not using the fund manager links.