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  • FIRST POST
    A199
    Aegon Flexible Pension Plan
    • #1
    • 24th May 11, 7:52 AM
    Aegon Flexible Pension Plan 24th May 11 at 7:52 AM
    I spoke to an IFA last week and after reviewing my details, I was recommended an SIPP with AEGON. It is the Flexible Pension Plan whereby in the first year, the full tax rebate component of the contributions is taken by Aegon as the upfront Fee.

    And subsequently, loyalty bonuses are paid by AEGON as a rebate to reduce the AMC in the subsequent years (the bonus is 0.25% for 0-20k, 0.5% for 20-50k etc...)

    I understand the concept of the bonuses and how this structure really makes you recover the upfront fee in future bonuses but wanted to ask if the size of the upfront fee is normal. As this means that effectively 40-50% of the gross contributions (contributions+tax rebate) for 1 year get paid as a fee. This seems quite sizeable to me.

    I tried searching the AEGON website but they do not seem to indicate the size of the gross contributions. Does that vary IFA by IFA (so basically this is their cut from aegon of acting as a representative for FPP)?
Page 1
  • dunstonh
    • #2
    • 24th May 11, 9:06 AM
    • #2
    • 24th May 11, 9:06 AM
    I spoke to an IFA last week and after reviewing my details, I was recommended an SIPP with AEGON. It is the Flexible Pension Plan whereby in the first year
    That is actually a personal pension with a SIPP bolt on available. If you are not using the SIPP functionality, then it stays a personal pension.

    And subsequently, loyalty bonuses are paid by AEGON as a rebate to reduce the AMC in the subsequent years (the bonus is 0.25% for 0-20k, 0.5% for 20-50k etc...)
    I wouldnt call it loyalty. It's generally referred to as a fund based discount. i.e. the larger the fund, the lower the charges.

    I understand the concept of the bonuses and how this structure really makes you recover the upfront fee in future bonuses but wanted to ask if the size of the upfront fee is normal. As this means that effectively 40-50% of the gross contributions (contributions+tax rebate) for 1 year get paid as a fee. This seems quite sizeable to me.
    You havent said what the fee is. Just how it is collected. What is the fee?

    The Aegon PPP is a low cost option. Its typically right up there with the cheapest plans. So, on that front, it is the sort of recommendation you would expect.

    I tried searching the AEGON website but they do not seem to indicate the size of the gross contributions. Does that vary IFA by IFA (so basically this is their cut from aegon of acting as a representative for FPP)?
    Tax relief is set by HMRC and is the same everywhere. The Fee is agreed between you and the IFA and will vary with IFA firms.

    IFAs do not act as representatives of Aegon. That is what FAs do. IFAs represent you.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • Iancfp
    • #3
    • 24th May 11, 9:08 AM
    • #3
    • 24th May 11, 9:08 AM
    This is one of the less clear charging structures that have been developed by insurers to allow them to pay out commissions.

    It is easier if you convert the charges into a amount

    Anything up to about 1,000 would be ok above that and it starts to look a bit over the top

    If you prefer clarity you may be better opting for a fee based adviser paying them directly and getting a clean proper SIPP

    Note I am Chartered Financial Planner and award winning Independent Financial Adviser but I can only give advice to clients who have given me their financial details. Any comments given in open forum are my own thoughts and are designed merely to assist and do not constitute advice
  • A199
    • #4
    • 24th May 11, 11:29 AM
    • #4
    • 24th May 11, 11:29 AM
    Apologies if it wasnt clear from my post but the upfront fees were the full tax (rebate) for the first 12 monthsso for example if the grossed up contribution was 1000 pm and the tax rate was 40%, then i was indicated that the money invested per month would be 600, the tax rebate would be 400pm and the upfront fees would be 400pm (total of 4800 for the full year).

    Therefore the fee would here be 40% of the gross contribution for 12 months. Seems quite high...
  • dunstonh
    • #5
    • 24th May 11, 11:48 AM
    • #5
    • 24th May 11, 11:48 AM
    Apologies if it wasnt clear from my post but the upfront fees were the full tax (rebate) for the first 12 monthsso for example if the grossed up contribution was 1000 pm and the tax rate was 40%, then i was indicated that the money invested per month would be 600, the tax rebate would be 400pm and the upfront fees would be 400pm (total of 4800 for the full year).

    Therefore the fee would here be 40% of the gross contribution for 12 months. Seems quite high...
    Originally posted by A199
    now the percentage is in context, yes its high. On the basis that the gross contribution is 1000 (you pay 800 and claim the extra 200 back via self assessment). If your direct debit is 600, then its less than that (750 gross but you will get the idea)

    1000x12 = 12000. 12k * 40% = 4800

    That is about 4 times the going rate for fee basis on a relatively straightforward case like this.

    Whilst the Aegon PPP can be a good option for 100 or so pm with basic investments for the inexperienced individual, it does seem a strange choice for a 1000pm contribution.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • A199
    • #6
    • 26th May 11, 11:49 PM
    • #6
    • 26th May 11, 11:49 PM
    Thank you for the helpful comments dunstonh and Iancfp. I was using 1000 as an example, as it was easier to illustrate numbers with it instead of something like 300.. (though I could have used 100 just as well !)

    The high charges ares something I need to think about, as now that I look at it, their listed AMCs seem to be higher than elsewhere (for non AEGON funds) e.g Hargreaves Lansdown for the same fund. (e.g: blackrock gold and general). So their fund based discounts are from a higher number...
  • Iancfp
    • #7
    • 27th May 11, 7:53 AM
    • #7
    • 27th May 11, 7:53 AM
    I really dislike providers that add to a standard AMC creating these mirror funds - should be smoke & mirror funds

    Standard Life SIPP does something similar

    I hope that post 2012 when commission is banned we might see a clean up in these providers acts
    A lot of other providers can off good clear terms but there remains a rump of players with complex charges that are no good for the client as they are not clear (rant over)

    Note I am Chartered Financial Planner and award winning Independent Financial Adviser but I can only give advice to clients who have given me their financial details. Any comments given in open forum are my own thoughts and are designed merely to assist and do not constitute advice
  • A199
    • #8
    • 27th May 11, 8:46 AM
    • #8
    • 27th May 11, 8:46 AM
    Iancfp, Does that mean that when they say the AMC is say 2.05% for Blackrock gold and general on their fund sheet but the blackrock gold and general website shows 1.75% (H&L shows the same latter rate for their SIPP), then it means that they really are creating a "wrapper fund" encapsulating the blackrock fund (but charging 0.30% more)?

    I was a bit puzzled how the same fund can be differnt in AMC. I used to think the AMC was the fund charges, and part of it was used to pay the pension provider (as a trail commission). Hence that the AMC for the same fund should be the same regardless of the provider.

    If so, yes, it looks like hidden charges to me
  • dunstonh
    • #9
    • 27th May 11, 9:24 AM
    • #9
    • 27th May 11, 9:24 AM
    The high charges ares something I need to think about, as now that I look at it, their listed AMCs seem to be higher than elsewhere (for non AEGON funds) e.g Hargreaves Lansdown for the same fund. (e.g: blackrock gold and general). So their fund based discounts are from a higher number...
    Be wary that pension funds use the TER as the AMC. So, if comparing them to unit trust/OEIC funds, you should compare them against the TER on those funds.

    Does that mean that when they say the AMC is say 2.05% for Blackrock gold and general on their fund sheet but the blackrock gold and general website shows 1.75% (H&L shows the same latter rate for their SIPP), then it means that they really are creating a "wrapper fund" encapsulating the blackrock fund (but charging 0.30% more)?
    Blackrock G&G on HL is 1.93%. Its still more than the Aegon version. However, you have to look at the Aegon discounting and not the flat fund charge rate to get a better like for like.


    The Aegon PPP is a good cheap pension for internal funds. It can beat a nil commission mono charged stakeholder pension. However, if you want to use external funds, then the use of PPPs or SIPPs with the UT/OEIC version is becoming more standard nowadays. The UT version is the real version. The pension fund version can have tracking errors and some do put in an extra charge.

    External pension funds used to the be the main way to get access to these sorts of funds in a personal pension but things just move on.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • A199
    You are right. I was looking at the amc on the website instead of the ter. The ter is indeed 1.93% and that s in line with hl sipp. The reason why i was looking at this is that one of the selling points of the aegon ppp by the ifa was that the upfront charges was more than made up by computing the benefit of the bonus fund based discount. This seems true for aegon funds but for non aegon funds the number seems sort of distorted by the fact thqt their pre discount charges were higher (e.g 2.09%) than the ter (1.93) that would cost me from having a sipp instead.

    By internal funds you mean aegon funds?
  • dunstonh
    By internal funds you mean aegon funds?
    yes.

    The fund based discounts apply to all funds. So, if you get the 0.5% discount, you have to deduct it from the AMC on all the funds on the aegon plan.

    ie. 2.09 minus 0.5%.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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