Am I asking pension providers the right questions re charges?

iheart_huskerdu

Hello all

Every year I vow to sort out my multiple pension pots for good and it never happens.

This year I am taking the bull by the horns and am writing to all my provider so I get an idea of how charges are affecting me.

I have three private pensions (am self employed, no employer contributions), and considering whether to consolidate them or transfer them to index trackers in a SIPP (possibly too ambitious for me).

One is a Scottish Widows plan (50 per cent with profits), the second is a pot of money from opting out of SERPS between 1989 and 1994 (am now opted back in) and the third is an ethical pension with Aviva, which is the only one that is being paid into.

I have written the following leter to all my providers, and wonder if anyone could critique it - I want to make sure I am asking for the right information.

I have found bits and bobs of information on Trustnet and a couple of other sites but I don't really know how to 'read' the charts and all the rest.

Thanks so much in advance

Sarah

Dear [pension company]

I wonder if you could supply me with the following information with regards to the Fund(s) held in my pension.

What is its free asset ratio?
What is its annual management charge?
What was its entry fee?
What is its exit fee?
What is its total expense ratio?
What is the percentage growth of the fund after the deduction of fees?
What is its 1-year, 5-year and 10-year performance?
What is its performance against the following benchmarks: FTSE All-Share; FTSE 100; sector equivalents?
What is its projected performance in illustrations?
Does it have contain initial or capital units?
Is it closed to new savers?

Can you also tell me its transfer value, and what any transfer fees would be?

Yours sincerely etc

jamesd

Why use a SIPP for index trackers instead of a normal personal pension? SIPPs are more for ETFs, direct shareholdings and other non-fund investments, not really for simple tracker funds.

Free asset ratio? Why do you want to know that? Not sure that the pension company will even have the information, it's something you'd contact the fund provider about, unless the fund provider is also the pension company.

For pensions the AMC and TER are usually the same, except in a SIPP.

They can't answer the percentage growth question very well because you've given no time period. You could ask how much you've put in and what the current value is if you want to know the investment gains but that won't tell you the annual investment returns or the average of them because your contributiosn have been varying and stopped for some places.

The benchmarks will vary by fund and for many funds there won't be a compaison with the FTSE.

The projected performance should be specified with any performance projection, it won't be kept independently.

The fund factsheets should be available to you and should answer most of these questions that are answerable.

BLB53

I think you are on the right lines to be checking charges as they can have quite a big impact on the eventual value of your pension over many years.

I transferred several different pensions to sippdeal around 5 years ago as the average charges were around 2%. Its not so difficult to manage your own sipp with a range of low cost trackers and/or investment trusts.

There was a good article on pensions last week on www.monevator.com outlining exactly this situation so as long as you have a good plan I think its definitely a good option.

There are lots of good articles on the site and a new ebook 'Slow & Steady ...' he recommends in this weekends article is worth checking out.

Regarding the questions, the main info would be to clarify charges and also to know about any transfer out penalties.

Good luck with sorting things out.

BLB

dunstonh

Are you able to understand the answers to those questions if you get them?

Some of the questions wont apply to your pensions (i.e. on the unit linked non-WP funds)

What is its annual management charge?
What is its total expense ratio?

Same thing on pension funds.

What was its entry fee?
What is its exit fee?

Better to refer to them as initial charges. However, simpler to ask them to supply details of product charges rather than list a few and not get told others that may apply but you were not told about because you didnt ask.

Is it closed to new savers?

you are not a saver. Is it closed to increments or top ups is the general phrase.

You missed asking if there were any guarantees, such as guaranteed annuity rates or guaranteed minimum pensions.

What is the percentage growth of the fund after the deduction of fees?
What is its 1-year, 5-year and 10-year performance?
What is its performance against the following benchmarks: FTSE All-Share; FTSE 100; sector equivalents?

The first 2 repeat themselves. You may also find they dont answer the benchmark question or just refer you to the fund factsheet.

PaulCooper

Here's another couple of important things to ask

What is the transfer value, it might be different to the value!, for fear of stating the obvious, the transfer value is what you get if you transfer the money away from them

Does the policy contain any Guaranteed Annuity Rates--- if so what is the rate.

I have to say the questions you have listed are beyond me--- maybe they shouldn't be, but I thought I was quite savy when it came to pensions. Incidentally, I did exactly what you are contemplating 5 years ago--- amalgamated 3 pensions into a SIPP, never felt more in control

Paul

iheart_huskerdu

Dunston - that is my fear - being able to understand the answers, however, an even bigger fear is ending up with a rubbish income when I retire so I am desperately trying to educate myself

As someone who is having no help with pension contributions I really need to make every penny count, but it is difficult making sense of all the conflicting information out there

I have joined Monevator and that is helping me understand all the jargon etc; I have also bought Tim Hale's book.

Thanks for info re: Sipp, James, I didn't even know I could use a personal pension in the way you said. I feel like the more I learn, the more I don't know and the whole thing becomes even more daunting.

But I had two relatives who were burnt heavily by the Equitable Life fiasco so I know I have to make the effort.

Anyway, thanks for all your helpful input everyone - I really appreciate it

Sarah