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Technical "Pension Illustrations/Quotes" Q

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Hi

I was wondering if anyone could help clarify (IFA's?), I work for an IFA company and I have been obtaining many quotes for clients from various providers. I want to know what the requirement is for pension providers to include in there pension illustrations. All the quotes obtained are on a paid up basis. Specifically:

-Occupational DC schemes (which work under the SMPI-providing one growth rate and projected value factoring in inflation at 2.5%)
-PP
-SIPP

Some provider will factor 4 things (AMC, TER[the bit above the AMC], product charge, fund rebate). Using the projections at 5, 7, 9% i can work out the annual charge using a system (O&M) which simply discounts back using the correct rate. However, I have noticed that for Occ DC scheme in the literature, they will say charges of between 1-2% but in the O&M would come out at only 0.1-0.3%. I question them (the adminstrators) but get nowhere as they don't understand. Therefore, is it a legal requirement to factor in ALL charges and rebates? Thanks. I am eager to learn more and know where I stand when I suspect the illustrations are wrong. Are there any set rules written down something?

Thanks

Comments

  • sandsy
    sandsy Posts: 1,753 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    katy123 wrote: »
    Hi

    Therefore, is it a legal requirement to factor in ALL charges and rebates?

    For all intents and purposes, yes. I can provide references to the relevant bits of SMPI guidance and the FSA Handbook, if you really need them.

    However, I suspect what is happening here is that the projections haven't actually been done at 5, 7 and 9%. These are maximum projection rates and many providers now project at less than these rates. If you discounted back at the actual lower projection rate, the effective annualised charges would come out higher.

    It would be very hard to find out what rates are being used as it depends on the fund choices within the pension wrapper. Some providers are also building things like lifestyling into their projections.
  • vbm
    vbm Posts: 116 Forumite
    Dont even get me started on this subject. You would not believe the amount of companies that don't include the additional expenses in their quotes or publish them in their TERs. There is a lot less conformity between providers then most in the industry think.
  • yelf
    yelf Posts: 863 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    No its not: as above some, sipp providers must quote on TER, and some on AMC.
  • dunstonh
    dunstonh Posts: 119,765 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    many pension funds have the TER as the AMC. You typically find IFA research software goes by TER as well when using non pension funds (O&M for example).
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • sandsy
    sandsy Posts: 1,753 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    yelf wrote: »
    No its not: as above some, sipp providers must quote on TER, and some on AMC.

    SIPPs are problematic as they are excluded from usual disclosure rules for KFIs.
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