Pension charges advice to understand please?

sandsy

Your wife would be expected to live, on average, for about 28 yrs (cohort life expectancy).


So at the minimum the funds (together with the expected investment return) have to be spread out over that expected period, and take account of the risk that you outlive your wife.


However, it very much sounds as though this an inflation linked illustration. Effectively, that means that because the value of the income will go up each year in line with inflation, it starts off lower.


If your wife was to take a level annuity, the starting figure would be higher but the income wouldn't increase each year and would lose its buying power over time (just like if there's no pay increases).

Skinnydad

Linton wrote: »

You cant add up % as they are % of the money in each fund. So say you had:

Fund 1 - £10,000, 1%
Fund 2 - £20000, 1%
Fund 3 - £30000, 2%
Totqal - £60000
The total charge would be 10000X1/100 + 20000X1/100 +30000X2/100 which gives £900.

So the overall % charge would be 900/60000 = 1.5%

Thanks Linton so I'll work it out this way over the 27 funds. You wonder why they don't make it simple and just say we charged you xx.y% and this came to £nnnn. Seems overly complex to me and a bit of smoke & mirrors for the uninitiated..

Thanks Sandsy still can't get my head around this..would have to look at the annuity route or drawdown alternative. As a matter of interest and you took the drawdown route could your pension company lose the lot and you'd be in the poorhouse

Thank you for all your helpful replies..

dunstonh

You wonder why they don't make it simple and just say we charged you xx.y% and this came to £nnnn.

They do on the initial illustration which gives example figures using an example growth rate.

As a matter of interest and you took the drawdown route could your pension company lose the lot and you'd be in the poorhouse

The pension company cannot lose the lot. Your investment decisions are not linked to the pension company.

jamesd

Skinnydad wrote: »

As a matter of interest and you took the drawdown route could your pension company lose the lot and you'd be in the poorhouse

Not the lot and not the pension company, particularly if it's a traditional pension company and you're using insured pension funds. The high loss cases would be those above the FSCS limit when there s so much loss to crime that the company is unable to cover them and becomes bankrupt. But that's not total loss because of the FSCS payout.

A recent criminality loss involved NEST, which is going to charge pension investors over time for the money it lost them because that's its source of revenue and it's not for profit so there's nobody else to pay.

The more normal high loss cases would be if the pensioner made really bad investment choices repeatedly. In that case it is possible to lose all of the money.

Without major failures like that it's not possible to lose all of the money because the GAD limit calculation will restrict how much money can be withdrawn based on the capital value remaining.

Skinnydad

dunstonh wrote: »

They do on the initial illustration which gives example figures using an example growth rate.



The pension company cannot lose the lot. Your investment decisions are not linked to the pension company.

Hi Dunstoh once again thank you for responding I do appreciate it. Forgive me if this is sounding think but I see nowhere on the 10 page statement where it says that Standard Life charged my wife X amount to manage this policy, either in a monetary or percentage figure.

There is a statement saying Payments out of your plan equals £323.03 upon further reading this states that this is an adviser charge. This I can only assume is the independent pension and financial planning company that my wife has set this up through. I can only assume that Standard Life is not doing this for nothing. As I said and forgive me if I’m missing the obvious but this should be clearer for the average person to understand.

Skinnydad

jamesd wrote: »

Not the lot and not the pension company, particularly if it's a traditional pension company and you're using insured pension funds. The high loss cases would be those above the FOS limit when there s so much loss to crime that the company is unable to cover them and becomes bankrupt. But that's not total loss because of the FOS payout.

A recent criminality loss involved NEST, which is going to charge pension investors over time for the money it lost them because that's its source of revenue and it's not for profit so there's nobody else to pay.

The more normal high loss cases would be if the pensioner made really bad investment choices repeatedly. In that case it is possible to lose all of the money.

Without major failures like that it's not possible to lose all of the money because the GAD limit calculation will restrict how much money can be withdrawn based on the capital value remaining.

Thanks James you always worry about someone running off with all your hard earned cash...

dunstonh

Hi Dunstoh once again thank you for responding I do appreciate it. Forgive me if this is sounding think but I see nowhere on the 10 page statement where it says that Standard Life charged my wife X amount to manage this policy, either in a monetary or percentage figure.

It it issued at point of sale and followed up with the cancellation rights.

Standard life pensions include the charges of the funds on their annual statement in percentage terms.