Charges to increase NFU Pension payments?

FlexibleFiend

My partner has had a stakeholder pension with NFU for years and has recently asked to increase her monthly contributions from £100 to £300. They have sent paperwork that seems to indicate that they need to set up a brand new pension to do this and there is a fee of £544

She has had a pre-arranged call with an adviser at NFU this morning who was no help and didn't have access to her details (duh..)

I though increasing your contributions to a stakeholder pension should be free (ie covered by your annual fees)?

I have seen their website that NFU's stakeholder pension was closed to new business on 31st December 2012 - I assume this is connected but she does not seem to be getting any info from NFU

dunstonh

I though increasing your contributions to a stakeholder pension should be free (ie covered by your annual fees)?

Until January 2013 that was the case. However, the regulator banned that method from January 2013. However, it has never been free. That is part of the myth that the regulator wanted to get rid of.

Stakeholder pensions are not actually compliant with the new rules. So, if you want to top up a stakeholder pension via an agent then you have to pay them a fee. On the plus side, the charges on the stakeholder will now be much lower and it would almost certainly be cheaper than the old method in the long run. Although some tied sales companies still keep the old charges at the commmission level but pocket the money for themselves.

On the negative side, stakeholder pensions have largely been obsolete apart from a niche market for about 5-7 years. Whilst, an IFA would look to use a personal pension (that also allows the fee to be taken via the pension and not paid by cheque - so you get tax relief on the fee), the NFU sales agent doesnt appear to have that option available to them (or they would have recommended it if they did).

With the contribution being paid, your partner would almost certainly be better on a personal pension. Not a stakeholder (and that would have been the case for the last 7-8 years). However, tied sales reps can only offer what their employer allows them to offer. If they dont have a multi-charge Personal Pension then they cant offer it. This is why people are told not to use tied sales reps.

FlexibleFiend

Thanks dunstonh - I also have a Stakeholder Pension with Virgin and can easily amend my monthly contribution on-line (I have done this regularly over the last few years and have a 10% increase applied automatically every year). There is no mention of a fee for doing this so I 'assumed' it was covered by the 1% I pay annually. Because of this, the £544 my partner is paying to the NFU to do the same seemed excessive - particularly because her total pension pot is currently only £20k. Doesn't this breach the government's terms that stakeholder "management charges can’t be more than 1.5% of the fund’s value for the first 10 years and 1% after that"

I am obviously behind the times as I thought Stakeholder Pensions were a recent development designed to standardise fees - I think a joint visit to an IFA is in order to ensure we are both making the most of our pensions

dunstonh

I also have a Stakeholder Pension with Virgin and can easily amend my monthly contribution on-line (I have done this regularly over the last few years and have a 10% increase applied automatically every year).

That is one of the worst pensions on the market.

There is no mention of a fee for doing this so I 'assumed' it was covered by the 1% I pay annually.

That is because it is a non-advice product. The changes only apply to advised products. However, you are paying Virgin higher charges than those an adviser would have.

Because of this, the £544 my partner is paying to the NFU to do the same seemed excessive - particularly because her total pension pot is currently only £20k.

Its not excessive. Its actually good value and almost certainly far cheaper than the Virgin stakeholder.

Doesn't this breach the government's terms that stakeholder "management charges can’t be more than 1.5% of the fund’s value for the first 10 years and 1% after that"

No. The product charges cannot exceed that but the £544 is not a product charge. It is an advice charge.

I am obviously behind the times as I thought Stakeholder Pensions were a recent development designed to standardise fees

in 2001, stakeholders were the cheapest option. By around 2005, personal pensions started to get cheaper as they were able to collect advice charges differently and in a way stakeholders could not. By around 2009, the differences were so significant that stakeholders were typically at the bottom of the list when it came to cheapest options available.

To give you an idea, the Virgin stakeholder at 1% p.a. includes around 0.60% commission that would have been paid to the adviser. There is no adviser to Virgin keeps the lot. It does that right up until retirement. So, on a £20k fund, Virgin are taking £120 that would go to an adviser but they are keeping. After 5 years that is £600. It would be more as you pay in more and the fund value increases - lets say £1000 by then. Long after the cost of the adviser is paid for, the product provider is still raking in the 0.6% and in the case of Virgin, raking in the whole amount.

If you had a personal pension and the adviser charge was £1000, then the £1000 is taken off the pension. However, the ongoing charge would be around 0.40%. It would take around 4 years to breakeven against a stakeholder pension. After that, the personal pension would be cheaper.

planteria

interesting. i have an NFU Mutual SHP, and i was under the impression that i could add to it whenever i want:think: