Charges - is this one a no-brainer?

jrb1221

Hi Folks,

I currently have a Standard Life stakeholder set up from work, but I know how important charges are, so I went to the FSA's comparison tables and look at the results:

Elements of the result page:

"You have chosen to compare personal and stakeholder pensions for a 30 year old, planning to retire at age 65, based on regular payments of £200 per month." (NB Same results at £100pm)

Provider Charges and deductions (ie the 'price' of the pension)

Abbey £13,900
Legal & General £44,191
Standard Life £77,591
Prudential £75,800
Nowrich Union £77,601
(There are others in between)

Look at the difference!! I can't believe it. Am I (or the FSA) not seeing something blatant here?!

Now obviously the investment options vary within these pensions and the site does indicate if charges for certain funds are equal to or greater than the calculated rate to get to these results.

My thinking is to go with one of the top 2 (L&G would be because of their investment choices), and ideally via Cavendish too.

Has anyone done a similar exercise and have you come to the same conclusions? Am I missing something?

Hopefully, we'll all save save some money...

dunstonh

The figures are for guidence only. NU, for example, would beat Standard Life virtually every time by far more than the margin there. Scottish Life, Skandia and Scot Eq arent even in your list and you would see them appear highest up if your term was over 20 years. Although you have selected stakeholder pension and they are not the cheapest at the current time. The FSA tables are not reliable as they assume full charge and do not appear to include fund discounting later on in the plan. Only what discounts are given from the start. It should also be noted that some providers give figures based on full number of years and others give it to a specific birthday. Others will include a payment on your final birthday, others will not.

If you are going with waiver of premium on your plan, then the cheapest ones are not that good. Some plans have automatic indexation, others do not.

Ideally, the best way of doing these things is look at the investment funds you want, then look at the wrapper/provider and choose the best one then. Is it worth saving 0.1% a year in charges but investing in a fund with 2% a year less potential for growth than the higher charged fund?

EdInvestor

Why not ask Standard Life to work out the full cost for you of a comparable pension charged on the basis used for your scheme, so you can compare? [If there's an IFA arranging this at work, you can ask him to ask SL].

If it's a Group Personal (or Stakeholder)Pension (GPP/GSP) then your company may have negotiated lower charges than those which appear on the FSA site on the "buy in bulk" principle.This is a second advanatge to a company pension in addition to the "free money" from your company.

The comparison tables BTW are at www.fsa.gov.uk/tables