Personal Pension Charges

JJforever

This has probably been discussed before so I apologise for asking the same thing again.

I have been trying to find the total charges on my Aviva PP. As far as I am aware you have the annual fund charge - 0.7% to 0.4% dependent on fund value. The fund manager charge, dependent on whether it's an internal or external fund. I take it the internal funds carry no charges. Then you have the fund manager's expenses.

On top of these charges do they charge a regular contribution charge? Are commission payments to the IFA paid from the annual fund charge or is there another charge on top? Not sure how this works now post RDR.

To sum up I am thinking would it be better if I transferred via Cavendish on-line which 'could' ultimately work out cheaper for me in the long run. Although I am not sure as I can't check the overall costs.

If anyone can point me in the right direction it would be greatly appreciated.

Thank you in advance.

bigadaj

The financial services industry certainly don't make it easy to work out costs!

For pensions the amc should be the same as the ter or ocf, so there shouldn't be additional costs above those you've been quoted.

Cavendish sourced pensions start at around 0.5% plus a small one off charge, there's a decent range of internal funds at those levels but external funds will cost quiet a bit more.

Ifa charges should be separate and if you aren't benefitting From them then. Make sure they are not being levied, presumably aviva can confirm this.

dunstonh

I have been trying to find the total charges on my Aviva PP. As far as I am aware you have the annual fund charge - 0.7% to 0.4% dependent on fund value. The fund manager charge, dependent on whether it's an internal or external fund. I take it the internal funds carry no charges. Then you have the fund manager's expenses.

Pension funds are different to OEICs and Unit Trusts. Although OEICs and UTs are moving that way too now. Pension funds have the TER as the AMC.

Some types of pension will separate the product/platform charge from the fund charge. So, in the case of Aviva Platform, you would have a platform charge and a fund charge.

Some types of pension will be mono charged (one charge) and that covers the fund and the product. e.g. Aviva stakeholder and many earlier Aviva and legacy company pension contracts.

Some types of pension will be almost mono charged but will offer a range of funds in addition to the internal ones which may cost a bit more. These are often displayed as an addition fund charge. A few of the Aviva personal pensions have these.

On top of these charges do they charge a regular contribution charge?

Depends on the pension. Most have not for the last decade or so but older ones frequently did.

Are commission payments to the IFA paid from the annual fund charge or is there another charge on top?

Depends on the contract. Typically the choice on older pensions was for the adviser to be paid up front or on drip. Not both. The charges were the same either way. Some in the 2000s allowed a combination. From the mid 2000s a lot of pensions effectively went fee based and the adviser charge was on top of the product/fund charge (which were lower as there was no commission factored into them). Today, there is no commission on new retailed pensions and adviser charge is explicit.

Most older pensions dont pay any ongoing commission beyond the start.

The financial services industry certainly don't make it easy to work out costs!

I am not sure that is fair. Whilst some 80s and early 90s stuff can be a real nightmare to work out actual cost without using software, most modern plans and plans for nearly the last 5-7 years are very easy to work out.

To sum up I am thinking would it be better if I transferred via Cavendish on-line which 'could' ultimately work out cheaper for me in the long run.

I do lot of pension switches and find that around 3 out of 5 are worth transferring in my experience. Not all old plans are bad. Some have guaranteed annuity rates/GMP. Some have protected tax free lump sums greater than 25%. Some have charges that are lower than modern ones (as they front loaded - so expensive at the start but cheaper later on).

Ifa charges should be separate and if you aren't benefitting From them then. Make sure they are not being levied, presumably aviva can confirm this.

That is only on recent products. On older ones, you can turn off adviser commission if there is any but it does not reduce the product charges. The provider keeps it instead.

JJforever

Thanks for all your replies.

So am I right in assuming that you have the Annual Fund Charge 0.7 - 0.4 plus the Fund Manager Charge - anything from 0.1 upwards, plus Fund Manager Expenses and that's it? Any IFA commission (my policy was taken out in 2004) is included.

Cavendish have a similar Annual Fund Charge plus again I'm assuming the Fund Manager Charge (not sure if they rebate any of this) plus any IFA commission is rebated. Therefore, it should work out cheaper but I'm not sure by how much?

dunstonh

So am I right in assuming that you have the Annual Fund Charge 0.7 - 0.4 plus the Fund Manager Charge - anything from 0.1 upwards, plus Fund Manager Expenses and that's it? Any IFA commission (my policy was taken out in 2004) is included.

A 2004 Aviva plan would be mono charged. They didnt facilitate explicit adviser charging back then. It was commission based and paid out of the fund charges. Not in addition to it. So, you would have the base charge and an extra fund charge only if an external fund was used.

Cavendish have a similar Annual Fund Charge plus again I'm assuming the Fund Manager Charge (not sure if they rebate any of this) plus any IFA commission is rebated. Therefore, it should work out cheaper but I'm not sure by how much?

There is no commission on IFA products and hasnt been for over a year. So, there is nothing to rebate.

bigadaj

I think your initial reply supports my point about obfuscation and lack of clarity within the wider financial services industry.

Things are beeptter than they were but the industry as a whole is effectively being dragged kicking and screaming and even then are still trying to discover new tricks to hide charges, like the recent hl threads.

I guess your response would be that's why you need an ifa but for me it's a real concern that open and honest charging appears so difficult to access when people are saving for the future and retirement and just wants clarity on relatively simple products that match their risk profile and asset allocation.

dunstonh

I think your initial reply supports my point about obfuscation and lack of clarity within the wider financial services industry.

How?

The OP at that point didnt say what product they were on and like any retail product, the versions change over the years. I tried to cover the main versions. Just because things change does not mean what you have changes. An Aviva pension from 2004 is an absolute doddle to understand. The problem is that the product is probably too simple and the OP is looking for charges or commissions that are not there.

I guess your response would be that's why you need an ifa but for me it's a real concern that open and honest charging appears so difficult to access when people are saving for the future and retirement and just wants clarity on relatively simple products that match their risk profile and asset allocation.

I dont agree. There are simple products for people that dont want to put the effort in. There are more complicated ones for those that want more.

JJforever

dunstonh wrote: »

An Aviva pension from 2004 is an absolute doddle to understand. The problem is that the product is probably too simple and the OP is looking for charges or commissions that are not there.

I decided to go through my documentation because you are right in that I am looking for charges or commissions that maybe are not there.

Initially they referred to an ‘Annual Fund Charge’ and mentioned ‘Your transfer value fund’ is 1% (I transferred another pension in). Then they referred to an ‘Annual Fund Charge’ and mentioned ‘Your regular contributions fund’ is 1% (I increased my contributions). Then they said ‘We take a yearly charge as follows – Your fund from monthly contributions is 0.6%’ (again had increased my contributions).

In 2005 they stated ‘Monthly contributions made by you – 0.6%
Transfer in payment is – 1%
Contributions made by NICO – 1%'

In 2009 they stated ‘Annual fund charge – 0.6%
Additional yearly charge (funds) – 0.4% (I had one fund that cost that)
Total yearly charge – 1%'
Then they mentioned a Fund manager expense charge (I didn’t need to pay this)

In 2010 I asked an IFA I used for this policy to check the charges I was paying and compare it to the new 'wrap' platform he was proposing. He told me I was paying, on average, an overall AMC of 1.06%. I’m still unsure how he came to this amount because you have the 0.6% charge (minus 0.2% for a fund rebate), plus a fund charge (highest one was 0.4% at the time). Total would be an overall AMC of 0.8%. So where he got 1.06% to 1.2% (reference one particular fund) I’m not sure unless commission was being paid to them. That is what I’m trying to figure out and whether I would save money if I transferred to Cavendish?


So when you say it's an absolute doddle to understand and that the product is probably too simple, I wish it was or are they deliberately trying to make it confusing?

dunstonh

So when you say it's an absolute doddle to understand and that the product is probably too simple, I wish it was or are they deliberately trying to make it confusing?

You had three contribution types. Two are getting 1% p.a. charged and the regular is getting 0.6% annual charge. So, somewhere around 0.8% would be the average.

I dont know what calculation the adviser did but the higher figure does not seem logical. Or possibly he was comparing the use of external funds if done on the Aviva plan compared to the alternatives.

I wish it was or are they deliberately trying to make it confusing?

There are some problems with trying to shoehorn older products into modern disclosure requirements. So, a mono charged plan with just an AMC when set up starts being broken down into segments to try and make it fit with current standards. However, often you get a mismatch of info that causes more confusion if you dont know what to look for.