Personal finance: Group up for a better rate

GROUPS AS small as three can now cut the cost of investing and insuring, as institutions race to offer the cheapest deals possible to friends, professional associates, work colleagues, club mates or just about any meeting of minds.

Protecting one's own "group" is one of the oldest principles of personal finance, to which many of our modern institutions can trace their origins. Legal & General, was established to cater for lawyers, Clerical Medical for doctors and the clergy, and almost every religious sect once boasted a bank, building society and insurer.

Until recently banks and building societies have concentrated on mass- market affinity products, noticeably credit cards targeted at political parties, charities, trades unions and football clubs. These were followed by a raft of savings accounts for organisations as diverse as the Quakers and West Ham football club.

Underwriting much smaller deals is becoming increasingly attractive, as insurance brokers and independent financial advisers struggle to find a role for themselves, as a technical revolution threatens to cut out the middleman. Where they can't persuade an insurer to cut premiums, brokers will often give a discount themselves by reducing their own commission. And many niche insurers, also struggling to forge a role in a market dominated by giant phone operators, are open to suggestions.

Martin Bell, of brokers Camberford Law, explains: "The bigger the group, the greater the potential for cutting premiums, but it is possible to arrange a special deal for quite small groups of people." Willis National regional director Christine Ross says: "Consumers often fail to realise that they can save money by coming to us in small groups. It is our job to go out and negotiate the best deal we can for them."

Personal pensions is one area where quite large savings can be made by setting up arrangements for a very small group of employees or union members. Ms Ross cut the charges on a Standard Life personal pension in half for a group of just three.

"This can make a big difference to what is left to invest from a small contribution of pounds 30 per month, " she says. Even on a larger monthly premium of pounds 200 cutting the charges in half will inject an extra pounds 4,000 into the final value of a pension pot of a 60-year-old who took out the policy aged 36.

Group deals on motor insurance are tricky, as margins are already tight, and broker commission among the lowest at 12 per cent. But, a broker may split his commission with customers for group business. The scope for cutting household premiums is more encouraging: broker commission can reach 25 per cent. Top-up with a discount from the insurer and costs crash.

Marc Donfrancesco of Independent Insurance, which is sympathetic to affinity marketing, explains: "There are no hard and fast rules. If someone puts a reasoned case ... then you will listen. If you have a big national broker providing vital business, you will always try to accommodate where possible. But there has to be something in it for the insurer and for the broker as well as a good deal for the customer."

Where the group or the broker takes responsibility for admin the likelihood of a decent discount is greater. Jamie Marchant of Lombard General, which also specialises in affinity groups explains; "If someone will accept responsibility for collecting the premiums, and maybe the broker underwrites and issues the policy, then there can be additional rewards for the group."

The workplace remains the most popular place for forming partnerships, either with an employer or via a trades union.

Most of the large unions, including the TUC, GMB, MSF and Unison, offer special deals for members that also earn the union attractive commissions. One of the most successful is the finance union UniFi, that is soon due to merge with banking union Bifu and NatWest Staff Association.

It not only offers a wide range of discounted products from pets to weddings insurance to its own members, but it also brokers these policies for other unions. The Bakers & Allied Workers Union is currently in the process of signing up for its household insurance.