How much am I paying for my HSBC pension?

deeboy1

Hey all


I wonder if someone can help me with working out how much a deferred pension is costing me.


As I now have a few different pension pots am trying to work out whether it is wise to keep a small HSBC pension worth £44k where it is, or if I should transfer into one of my active pension pots. It would be be easier for asset allocation purposes to merge them to be honest and I can transfer at full value and with no charge.

Recently I emailed the pension administrators as follows:

Me:

I am unable to find detailed information on any of the fund factsheets about how much I am paying for management of the underlying assets and funds in which these funds are invested.

The only reference I can find is as follows:

"The charges relating to the investment management of the fund are settled by HSBC and not the member. There will, however, be some residual costs within some of the underlying funds that will be reflected in the unit price. These nominal costs are variable but it is anticipated that they will be between nil and 0.2% per annum."

So, for example, take one of my holdings, the Global Equities Fund Active, this is invested in a number of underlying funds:

• MFS Global Equity Fund
• M&G Global Leaders Fund
• DCS UK Equities – active Fund (which is in turn invested in Invesco Perpetual UK Equity Pension Fund, Artemis UK Special Situations Fund, RWC UK Focus Fund)
• DCS Emerging Markets Equities – active Fund (which is in turn invested in Trology Emerging Markets)

I am unclear how much HSBC is actually paying the underlying fund managers to access these funds and therefore what the TER including AMC is.

Or, does the text I have quoted mean that the TER I am effectively paying to be invested in all of these funds, and for the management of the Global Equities Fund as a whole, is between nil and 0.2% per annum?

Response:

Further to your email below, I can confirm that the Bank meets all direct administration and annual management charges on behalf of members.

Our understanding is that the ‘0% to 0.2% residual charges’ wording you have quoted from in the Scheme literature refers to each fund as a whole, rather than any of the individual underlying funds that they are comprised of.

***

I had tried to be as clear as possible with the wording of my email but think I may have failed because I'm still not 100% sure from the answer how much I am paying.

Does this really mean that all fund management charges are paid for by HSBC and not taken from my investments, and not charged to me, apart from some residual charges between 0 and 0.2%? This sounds too good to be true, so I wanted to get a sense check. If I'm paying for active fund management I don't really need then I would move it but if I am effectively getting access to a well-diversified range of funds for free I would leave it where it is.

thanks for any light you can shed on this folks!


deeboy

mania112

Well, in any case it's between 0% and 0.2% - that includes the fund and the pension charge.

You won't find anything cheaper than that - unless perhaps you're combining it with other pension funds which total over £1m.

If you're looking solely at the costs, don't consider moving it.

dunstonh

I am unclear how much HSBC is actually paying the underlying fund managers to access these funds and therefore what the TER including AMC is.

Pension funds use the TER as default. i.e. if you were comparing a pension fund AMC you should compare it with a unit trust TER. Not a unit trust AMC. There is possibly a commercial arrangement between the provider and the fund house but what is paid behind the scenes is not currently disclosed. It doesnt matter that much to you anyway as what you pay is what matters.

Does this really mean that all fund management charges are paid for by HSBC and not taken from my investments, and not charged to me, apart from some residual charges between 0 and 0.2%? This sounds too good to be true, so I wanted to get a sense check. If I'm paying for active fund management I don't really need then I would move it but if I am effectively getting access to a well-diversified range of funds for free I would leave it where it is.

It probably means that the fund charges add between zero and 0.2% to the contract charge depending on the fund used. Many modern contracts have the charges split between contract, fund and adviser/administrator. Many insurance company funds tend to have the cost built into the contract charge with external funds having an additional charge.

deeboy1

ok thanks both. I just thought it had sounded too good to be true, but it seems from what the administrators and you have both said that I really am getting the fund management for free (less maybe 0.2% max) and so I won't be moving this money any time soon.


deeboy

Debt_Free_Chick

Yes, the Bank is paying what you would normally see as an AMC on the funds. Instead of that AMC being built in to the unit price, the fund managers send the Bank an invoice and they pay the AMCs directly.

Effectively, the TER met by you is whatever residual costs (usually transaction costs) are in the unit price.

In addition, these are almost certainly "institutional" funds rather than retail funds, so the AMC is purely the cost of managing the money. In a retail fund, the AMC covers everything - fund management, administration, online services, communications etc. Hence, AMCs in institutional funds are generally lower than in retail funds.

If the TER you're paying is 0.20% you'll see that's a cracking deal for an active Global Equities fund.