Pension charges not in annual statement - why not

SquareMeal

Howdy, my first post. I wonder what your experience is with pension charges.

I recently received an annual statement for my Standard Life pension. It has plenty of information about the pension fund, but does not mention charges, and does not say how much has been taken as charges in the previous year. I know the charges amount to about 1%, but even so, I would like to see the exact amount charged, on the statement.

I reckon a statement for any financial vehicle - bank account, credit card, whatever - should show how much money has been extracted in charges. My bank would not charge me 10 pence without showing it on a statement - so why should my pension company not be likewise transparent ?

dunstonh

but even so, I would like to see the exact amount charged, on the statement.

The pension doesnt have any charges (assuming modern PPP or stakeholder - legacy plans might). The contracts are mono charged and are only in the funds. Not on the contract.

I reckon a statement for any financial vehicle - bank account, credit card, whatever - should show how much money has been extracted in charges. My bank would not charge me 10 pence without showing it on a statement - so why should my pension company not be likewise transparent ?

It is transparent but you are looking in the wrong place. You are looking at the wrapper which has no charges. Not the investment content that does.

SquareMeal

It doesn't matter where the charges originate, I pay them and I don't see why this shouldn't be shown on the statement.

I guess other pension companies do the same, but I wanted to check with forum readers.

dunstonh

It doesn't matter where the charges originate, I pay them and I don't see why this shouldn't be shown on the statement.

What if the pension provider doesnt know the charges? You could be dealing with your own investments within the pension.

If we assume your pension is not a legacy contract or a SIPP and is a modern mono charged one your pension has zero charges. The investment funds have the charges and that information is available upon request, on their website and the independent research sites. If there are charges on the wrapper then they do generally disclose these on statements.

You have to think of the pension and the investment as two different things.

SquareMeal

I follow your point, but I would nonetheless find it helpful to see the total charge on the statement. Standard Life are managing this pension for me, after all. I can't accept that they don't know the amount of the charge, or that it is too complicated for them to work out. The lack of information just leads me to assume the worst.

I am not a pensions expert, but the ongoing charge will have a large affect on my eventual retirement income. I might pay tens of thousands in charges over the next 25 years. But getting any Financial company to even discuss charges is extremely difficult. It is like a forbidden or taboo subject.

I called the advisor who set up the pension and he told me that legally, pension companies are not bound to put the charges on the statement.

EdInvestor

If you want transparency on pension charges there are two things you need to do:

1.Use a SIPP, not a traditional pension ( preferably a low cost online one).
2.Invest directly in shares, avoiding collective vehicles such as unit trusts or other funds.

As long as you invest via funds, you will not get a clear picture of charges because the providers are not required to reveal the information.

Debt_Free_Chick

SquareMeal wrote: »

It doesn't matter where the charges originate, I pay them and I don't see why this shouldn't be shown on the statement.

I guess other pension companies do the same, but I wanted to check with forum readers.

The charge is not a deduction from your savings pot. It's taken in to account when the provider calculates the unit price - this is the price that you buy units, when you make a contribution and/or sell units when you take the money out.

If the "face value" of the units is £1 then your statement will show that the unit is worth 90p - a crude example, but in practice this is how it works.

In the same way that you don't see the markup on the price of a pair of knickers at M&S, you don't see the charge in the price of your units

SquareMeal

In my pension, the charge is subtracted daily by cancelling units in each fund.

I think it is shocking that pension charges are allowed to be kept secret from the customer (or semi-secret). As the one who is paying the charges, you have a right to know what they are. With a pension, even a small difference in charges can have an enormous effect (tens of thousands) on the eventual fund size.

How much of your pension has been spent on charges in the last 10 years ? Be nice to know, wouldn't it ?

Anyway thanks to the above posters for answering my question: pension charges are not generally shown on annual statements.

dunstonh

I think it is shocking that pension charges are allowed to be kept secret from the customer (or semi-secret).

You mean the way that they are disclosed on personal illustrations before you buy them and are published on their websites and every independent fund site is secret?

Be nice to know, wouldn't it ?

Its on the personal illustrations provided at point of sale.

saveallmymoney

All my Pension statements have been this way, you always have to back to the original documentation to find out whats going on. I agree this is extremely sneaky, and it is clearly done so you don't notice the charges so much.

If your comfortable managing your own investments, you can re pension to avoid a lot of the charges as Martin says in his pension guide.

EdInvestor

http://www.webarchive.org.uk/pan/16806/20070802/www.pensionscommission.org.uk/publications/2004/annrep/chapters/ch6.pdf

More information on the implict charges you pay in pensions is availble in the Pension Commission report, scroll down to page 14.

These charges will double the revealed charges of 1-1.5%.

Over time as the OP says, as much as half of your fund can easily end up in the pockets of the providers. :mad: