Panorama - Pensions Charges

Loughton_Monkey

Get off the fence, Peter, and say what's on your mind!

dunstonh

1. Yes the Dutch cheapest available scheme which you describe as "institutional" is also the biggest in terms of numbers of members, is that not correct ? Then maybe the funds we are encouraged to use should also be "institutional" although I am not sure what you mean by the word. I kind of got the impression that the Dutch scheme was a simple scheme with simple government-set rules. I like simple with government-set rules. It is a big step to transparency.

Institutional funds are what are used by occupational pensions (and other large investors). They tend to be cheaper than the retail funds made available to consumers (economies of scale). i.e. a fund may require a minimum value of £x million to use that fund.

2. You mention layers, fund charge, product/tax wrapper charge and the cost of advice. Not interested in those. Don't need those in a simple scheme that most of my neighbours might also be in and if I trust my government.

You may not be interested in them but if the research includes them on one side, it should include them on the other. Or it should remove them on both sides.

3. Benchmark pricing for charges? Not interested. Why should I be interested in benchmarks if I am not paying anyone a cut to help me decide or to play with my money in their speculative game? I have never in my 30 odd years of working life met anyone in UK financial services who has survived alongside the advice they have given. One or both fall too quickly by the roadside. The reason is that the advice is just a game and the players tire of old games very quickly, constantly change the rules and if you are daft enough to step back in and call yourself a player who understands the risks after the rules have been corrupted then you'll soon have the shirt taken off your back, even if they daren't take it while you were away.

Again you may not be interested but if you are going to compare schemes available then you need to look at what is available. If the UK figure is typically 1% then picking 1.5% is irresponsible.

4. UK pricing/wrappers/advice again? Not worth a light. Not relevant.

Again, you may not see the relevance but again, if you are comparing the pricing of the two you need to compare like for like.

Like-for-like? You want to dumbdown a working Dutch system and load it with the type of charges that the UK Financial Services industry likes to see? You must be joking.

The dutch system has them as well but on a layered basis as I already said. The research just picked one layer; the fund. It disregard the other layers but decided to include them in the UK side.

A bit like comparing two cars. The UK one is ready to drive away now. Taxed, insured, full of petrol etc. The Dutch one is a kit on the floor and missing half its parts.

We have nothing in the UK like that.

Yes we do.

peterbaker

Yes we do

What is it? Why do my neighbours not know about it?

I know you are closer to Holland up their in Norfolk than most of us DH, but are you really saying that the BBC assertion that the Dutch pensionists are generally 150% better off than their UK counterparts is 33% erroneous?

bendix

Could the fact the the BBC continually sensationalises defined contribution pensions in a ridiculously ill-researched and very one-dimensional way be related perchance to the fact it is an organisation staffed by publicly funded employees desperate to keep their final salary pensions?

I wonder.

dunstonh

What is it? Why do my neighbours not know about it?

Probably as they havent gone looking for it.

You have the vantage tracker funds, the dimensional tracker funds, the Blackrock tracker fund. All of which can give you a price at that level. i.e. Vantage are 0.1%

I set up an individual pension recently with a reduction in yield under 0.3%. So, even on the retail side you can get low if you want.

but are you really saying that the BBC assertion that the Dutch pensionists are generally 150% better off than their UK counterparts is 33% erroneous?

The research didnt come from the BBC but yes it is erroneous.

We are probably still a tad more expensive on a like for like basis but nowhere near that gap. We also have some very expensive examples out there still. However, the Dutch do as well.

You could get examples of good and bad in both countries. Perhaps the next research should compare UK occupational pensions using institutional trackers at 0.1% against Dutch individual retail pensions using fully managed funds and then add on 50% to those charges for luck. We can then say the Dutch are paying 150% more than those in the UK.

wary

I've only just watched the Panorama report. I was a little worried initially as my IFA recently moved my pension from a bog-standard Stakeholder-friendly Aviva pension (AMC 0.8% - 1%) to L&G Cofunds, which featured as third worse for charges.

Obviously the AMC varies across funds (I think my average is around 1.75%), and my IFA takes 0.5% of the pot annually (which I believe comes out of the AMC) for servicing. The fees are higher than what I previously incurred, but it was done on the basis that the new pension should perform significantly better and also I'm now getting servicing included (IFA time doesn't come cheap). These are factors that the programme seemed largely to overlook, although being a novice when it comes to understanding pensions & investments, it did still leave me a little concerned.

Should I be concerned at having switched to this pension that attracts significantly higher fees? The consensus here would indicate that I shouldn't put too much emphasis on the Panorama exposure.

dunstonh

Should I be concerned at having switched to this pension that attracts significantly higher fees?

I would take Cofunds over an Aviva stakeholder any day.

Also, Cofunds are frequently coming up near top on charges at the moment depending on the funds you use. The panarama report contained incorrect information.

As Cofunds offer funds from 0.25% to 1.75%, you can have it cheap or expensive. However, that goes for every single fund supermarket pension out there and every SIPP. Something that Panarama didnt take into account.

Obviously the AMC varies across funds (I think my average is around 1.75%)

Thats higher than normal. The vast majority of managed funds are 1.5%. The fact your IFA is getting the natural 0.5% would suggest yours should be 1.5% as well. You may have some 1.75% funds in there as things like emerging markets, china and specialist areas can cost more.

These are factors that the programme seemed largely to overlook, although being a novice when it comes to understanding pensions & investments, it did still leave me a little concerned.

Correct. The programmme totally ignored that.

Should I be concerned at having switched to this pension that attracts significantly higher fees?

Put it this way. My pension is with Skandia. Ok, thats a different provider to yours but it is also a platform like Cofunds and has near identical fund range (over 1000 UT funds). The HL SIPP that you see many posters here use is also a platform like Cofunds with identical charges. Fund supermarket/platform based pensions are increasingly common. They can be dirt cheap if you want to stick to the cheap funds or they can be quite expensive (compared to stakeholder) if you use the more expensive investments. You cant say they are cheap or expensive without taking into account the servicing you are getting and the funds you are using.

dunstonh

I just read an email out from Scottish Life. I didnt pick up on it at the time but Scot Life have pointed out that the panarama calculation that 80% go in charges was totally flawed as they were classing the charges in todays money terms yet the illustrations (which they took the charges data on) is future money terms.

[FONT=&quot]A better way to look at this is the RIY. Against a gross investment return of 7%pa [and 40 years], an RIY of 1.5% eats up 21% of the investment return generated. [/FONT]

That is a long way from the 80% stated by the programme

The ABI have said that the average charge on pensions today is between 0.5% and 1% ( source: Maggie Craig, ABI - who was on Panarama and said that. However, the programme went with 1.5%).

Loughton_Monkey

dunstonh wrote: »

[FONT=&quot]A better way to look at this is the RIY. Against a gross investment return of 7%pa [and 40 years], an RIY of 1.5% eats up 21% of the investment return generated. [/FONT]

That is a long way from the 80% stated by the programme

The program's 80% was charges as % of premiums (contributions) paid. Not as % of final or gross fund. This, I suspect, is why they chose 7% growth. To have assumed 8% maybe would have got >100% of premiums. And even BBC editors would start smelling a rat about that one.

Your 21% of fund is the more 'meaningful' figure. As I've said before, still a good debate as to whether this is too high, but this debate has to wait further until someone (other than BBC) takes up a significantly more intelligent debate - and leaving out the blind men who have been ripped off by criminals.