Private Pension charges.

Sideways

My wife has two pensions, a public sector and a small private sector pension.

She recently wrote to the provider of the private pension and advised them she will no longer be making any contributions and to freeze the policy (she has lost confidence in the private pension sector).

They have acknowledged her request but have advised her she will continue to be charged handling fees etc. Is this correct?

Many thanks.

Linton

It seems strange to have lost confidence in the private pension sector. Nowadays pension investments are no different to any other form of investment.

However, yes she will still be charged fees. After all her investments still need to be managed, annual statements sent out, pension company salaries paid etc etc.

Sideways

Thanks, what are your thoughts on these arguments against saving in a small private pension….

• The excessive charges. The smaller the contribution the more onerous is the charge.
• The lack of control and access to the capital in case of emergency.
• When retirement age is reached you will be hit with a triple whammy of uncertainty of pension value due to fluctuating annuity rates and investment values, the imprisonment of YOUR savings by being forced to buy an annuity and the interest element of your annuity being taxed.
• Means testing- People who do not save will be rewarded with Pension Credits & Top-ups, meaning you would have got the money even if you had saved nothing (as the system currently stands).
• The continued rise in the cost of living and the failure of salaries to keep pace.
• Equitable Life.
• ZIRP.

I have an open mind and would be interested to read the arguments in favour.

Andy_L

1. You can shop around & the charges are much the same as any other investment
2. Or is that a feature in that the money is protected from bankruptcy, means tested benifits & lack of self discipline?
3. You don't need to buy an annuity. Fluctuating investments are the same for any other investment, if you go for cash then your have inflation risk instead.
4. Small pensions are fairly pointless, however that means your planning to live on the breadline in retirement & that the system remains the same forever
5. Same for any other option
6. I don't believe anybody offers the same product anymore
7. Would affect any form of saving

DavidLaGuardia

Equitable Life was the failure of an investment company due to its policies.

Other companies gave guaranteed annuity rates but, unlike EL, they had sufficientreserves in their With Profit funds through refusing to pay the sort of bonuses Equitable made to attract busines under the illusion that the funds performed well.

ZIRP is notheing to do with pensions.

Sideways

DavidLaGuardia wrote: »

ZIRP is notheing to do with pensions.

http://www.telegraph.co.uk/finance/personalfinance/8135118/Pensions-decimated-by-low-interest-rates-warns-Saga.html

dunstonh

The excessive charges. The smaller the contribution the more onerous is the charge.

Incorrect. Mono charged personal pensions/stakeholder pensions have only an annual charge which is percentage based. i.e. 1% p.a. So, the smaller the fund, the smaller the charge.

The lack of control and access to the capital in case of emergency.

This may come as a surprise but its a pension. Not a savings account. It is not to replace an emergency fund or short term savings.

You have as much control on pension investments as you have unwrapped and ISAs.

When retirement age is reached you will be hit with a triple whammy of uncertainty of pension value due to fluctuating annuity rates and investment values, the imprisonment of YOUR savings by being forced to buy an annuity and the interest element of your annuity being taxed.

Investment returns are irrelevent to a tax wrapper. If you want less uncertainty the invest in less volatile investments. You are not forced to buy an annuity. Income is taxable just as it is on unwrapped alternatives.

Means testing- People who do not save will be rewarded with Pension Credits & Top-ups, meaning you would have got the money even if you had saved nothing (as the system currently stands).

The means test levels are very low. If you plan to be poor in retirement then no point using a pension but then no point saving either. You then have 20-30 years of living on under £10k a year.

Money saved is hit harder than income.

The continued rise in the cost of living and the failure of salaries to keep pace.

Myth and short term.

Equitable Life.

We have a lot to thank Equitable Life for. Just one insurer created a range of securities and protections that exist today. You cannot compare the product they had with anything available today. Its a bit like saying you wouldnt buy a car as a Ford Model T doesnt go very fast.

Old_Slaphead

DavidLaGuardia wrote: »

Equitable Life was the failure of an investment company due to its policies.

Other companies gave guaranteed annuity rates but, unlike EL, they had sufficientreserves in their With Profit funds through refusing to pay the sort of bonuses Equitable made to attract busines under the illusion that the funds performed well.

The illusion was perpetrated on the premise that they didn't pay intermediaries (but they ignored the fact that they ran their own salesforce which probably cost a similar amount) rather than that their WP fund outperformed.