Company Pension

Not_a_Newbie

Can anyone help?

I've been given the opportunity to join the company pension scheme, as I'm only on a temporary contract I thought this was a very good benefit.

The information I have received says that the pension is a Group Personal Pension Plan for employees of the company I work for, and that I can take it with me when I leave the company without losing employer contributions.

Included in the pack is an illustration of what my pension could be given a certain level of contributions. The info states:

My monthly Contribution 137.50 (based on 5.5% of salary)
Employer Contribution 137.50 (as above)

What concerns me is the illustrated charges. The example states that after 31 years of contributions, the total amount of charges could be £58,900 effectively reducing the estimated percentage growth from 7% to 6%.

To me £60,000 seems a helluva lot of money, does anyone else have any experience with pension charges?

The pension scheme is managed by Friends Provident.

dunstonh

To me £60,000 seems a helluva lot of money, does anyone else have any experience with pension charges?

1% charge is nothing. Supermarkets work on a profit margin of 10-15%. Electrical Goods is closer to 30%.

The reduction in yield of 1% suggests an average annual management charge of 0.9%. You have to look at what they are doing and what is involved. You have the advisor dealing with the paperwork on new applications, the pension provider dealing with the admin from that advisor, the investment team dealing with the investments contained within the pension. All for less than 1% of the value. You also need to remember that its not 60k in todays terms. For example, in year 31, £1900 would be worth around £700 in todays terms.

In year 1, FP will be charging you less than £15 for the pension.

Nothing is free. Even the money in your savings account is being charged. Only difference is that with a pension, they tell you how much. With a savings account, you dont get told but are paid an interest rate after they have taken their charges.

EdInvestor

Not_a_Newbie wrote:

To me £60,000 seems a helluva lot of money, does anyone else have any experience with pension charges?The pension scheme is managed by Friends Provident.

You're not alone in thinking pension charges are very high, sad to say this is fairly normal.:(

Try putting your figures through the caculator on this official site and you can see how the charges compare with other similar pensions:

https://www.fsa.gov.uk/tables

It would also be helpful if they could tell you what percentage of the projected total maturity value would be lost as a result of the effect of the charges.

ManAtHome

Also remember that your employer may not be willing to match your contributions into another scheme - the 'free money' will be worth more than the charges.

whiteflag_3

dunstonh wrote:

1% charge is nothing. Supermarkets work on a profit margin of 10-15%. Electrical Goods is closer to 30%.

The reduction in yield of 1% suggests an average annual management charge of 0.9%. You have to look at what they are doing and what is involved. You have the advisor dealing with the paperwork on new applications, the pension provider dealing with the admin from that advisor, the investment team dealing with the investments contained within the pension. All for less than 1% of the value. You also need to remember that its not 60k in todays terms. For example, in year 31, £1900 would be worth around £700 in todays terms.

In year 1, FP will be charging you less than £15 for the pension.

Nothing is free. Even the money in your savings account is being charged. Only difference is that with a pension, they tell you how much. With a savings account, you dont get told but are paid an interest rate after they have taken their charges.

Dunstonh - I have to hand it to you. I wonder where you get the energy and motivation to keep fighting against the tide. :beer:

Its scary that Ed thinks that a 0.9% amc is expensive :eek:

Can you imagine IF me or you advised a client not to join a GPP with an employer contribution of 5.5% of salary on the basis of a .9% amc :eek:

A 40% reduction on stakeholder charges and she is planting a seed of doubt :eek:

Unlike you I have given up posting helpful info to genuine enquirers as I feel it is a waste of time .

Its like "ive heard 2+2 = 4 is this true? Youll post " I deal with this every day and can confirm 2+2 is 4" Then Ed posts "Typical ! sad to say it but the financial services industry have been saying this for years . IMHO there are times when 2+2 might not equal 4. Heres a link to another website where some other people have decided that 2+2 might equal 3"

Then when you argue that 2+2 is 4, its you that gets the grief and have to justify yourself, while Ed is off on another thread :mad:

PS DH isnt it ironic that if you rank the pensions on the comparative tables in order of dedutions (lowest first), some of the ones with the lowest charges over the term pay the highest commissions!

jonjack

Well I think that Edinvestor posts some good advice and information. I read all the points on SIPPs, Equity release and High Yield Investments with great interest.

Ed is only trying to put into the public domain risk free cheap investment contracts so that everyone can benefit.

I've already decided to release some money (about £80,000) from my house and put half in Sipps and half in high yield blue chip investments following information posted on this site. All this is obviously cheaper than it would be if I went through a financial adviser

whiteflag_3

jonjack wrote:

Well I think that Edinvestor posts some good advice and information. I read all the points on SIPPs, Equity release and High Yield Investments with great interest.

Ed is only trying to put into the public domain risk free cheap investment contracts so that everyone can benefit.

I've already decided to release some money (about £80,000) from my house and put half in Sipps and half in high yield blue chip investments following information posted on this site. All this is obviously cheaper than it would be if I went through a financial adviser

So how will you feel if theres a property slump combined with a slump in equity prices!

An adviser would never advise you to do what youve done so your last post is irrelevant :sad:

jonjack

I'm confused you say that an adviser would not recommend what i'm considering and yet Edinvestor does say that SIPPs and HYI are the best.

I thought that Edinvestor was an adviser?

whiteflag_3

jonjack wrote:

I'm confused you say that an adviser would not recommend what i'm considering and yet Edinvestor does say that SIPPs and HYI are the best.

I thought that Edinvestor was an adviser?

Really sorry jonjack but im dont know what Eds occupation is , however as you gathered both dunstonh and myself are IFAs. Any Ifa recommending you to do what you,ve done would be hung drawn and quartered by the FSA. I also act as my firms compliance officer and therefore know that assessing peoples attitude to risk and affordabilty is paramount before making any investment recommendations.

The golden rule of investing in equities is you should only invest what you can afford to loose.

dunstonh

Edinvester has no investment authorisation and is not regulated to give advice. She is linked with the investors association and is anti financial services (on the whole). This is why there tends to be that sort of bias in her posts.

I've already decided to release some money (about £80,000) from my house and put half in Sipps and half in high yield blue chip investments following information posted on this site. All this is obviously cheaper than it would be if I went through a financial adviser

I'm sure you are joking when you post that although the missing sarcastic smiley doesnt help.

whiteflag_3

jonjack wrote:

Ed is only trying to put into the public domain risk free cheap investment contracts so that everyone can benefit.

Perhaps Edinvestor will be kind enough to post that SIPPS are not risk free to avoid any further confusion!

JohnG, Kittie etc etc etc I rest my case