Fund pension pot AMC not what they advertise

jbagric

As a relatively new investor, apologies if this is posted in the wrong place.
Ten years ago, i became self employed having left a company final salary scheme behind. I was advised to open a Friends Provident New generation personal pension plan (now Friends Life). I made monthly and single investments into a number of self chosen funds. Here i am 10 years on and getting closer to retirement so thought its about time to have a bit of a review. I noticed in my last annual report from the FL pension (July 2016) that the pot was growing nicely, but some of the funds perhaps need tweaking.
My concern is that on the annual report, some of the funds show AMC charges way higher than originally advertised, and indeed higher than on the current literature.
For example the FL property fund has an AMC of 1.00% on my statement, but on the literature shows 0% and additional expenses of 0%. This is a theme through my portfolio FL index linked 1.00%(should be 0), FL Artemis UK Special situations 1.75% (should be 0.75 + 0.1). I wont bore you with the list, but am i missing something? Is this normal? or have they made a mistake...or fleecing me?
Any sensible advice welcome. Many thanks in anticipation.

dunstonh

I was advised to open a Friends Provident New generation personal pension plan (now Friends Life).

Good pension in its day. Looking a bit out of date now though.

I noticed in my last annual report from the FL pension (July 2016) that the pot was growing nicely, but some of the funds perhaps need tweaking.

FL do not employ anyone to engage in that discussion. So, who is exactly recommending these "tweaks"?

My concern is that on the annual report, some of the funds show AMC charges way higher than originally advertised, and indeed higher than on the current literature.

The pension plan you have includes a wide range of funds. These will be internal funds and more expensive external funds.

The product itself also has fund based discounts. So, the default charge may not actually be the one you are paying due to fund size.

For example the FL property fund has an AMC of 1.00% on my statement, but on the literature shows 0% and additional expenses of 0%. This is a theme through my portfolio FL index linked 1.00%(should be 0), FL Artemis UK Special situations 1.75% (should be 0.75 + 0.1). I wont bore you with the list, but am i missing something? Is this normal? or have they made a mistake...or fleecing me?

The default charge is 1%. The FL property and index linked funds are internal funds. So, they have no additional charges on top of that 1%. The Artemis UK Spec Sits fund is external so would have additional charges on top.

Yes it is normal and no they are not fleecing you. It is just an old fashioned way of displaying fund charges when there is a product charge that includes a basic fund charge.

TCA

I'm guessing you're looking at literature that is something like this below:

https://library.friendslife.com/mpen25a.pdf

On pages 11-13 you have the charges but I think your own plan will have a sort of "base charge", possibly 1% from what you're saying. In the case of passive index funds and their own actively managed funds (like the FL Property fund), there are no additional charges, so your annual statement would likely show a 1% AMC for that. For actively managed non-FL funds, like FL Artemis UK Special Situations, there is an additional charge, in this case, an additional 0.75%, so your annual statement will show an AMC of 1.75%.

That's my thinking anyway.

jbagric

Thanks for your reply.
The IFA that originally helped me set this up is a very good friend of mine, but has now retired. He has, as a favour quickly cast his eye over the plan, hence my comment it needs tweaking. I appreciate his advice and his honesty, and he has advised a review with an IFA.

TCA

I have the same sort of pension which is a former works plan. My base charge is 0.6% which I assume was agreed by my old employers. I've been looking at this recently given my balance is now around £100k and pondering whether I'd be financially better off in a fixed fee SIPP with charges possibly as low as £180 p.a. What I've not sussed out yet is the charging at maturity. FL are telling me they have no ongoing charges at maturity whereas that doesn't look the case if I moved to a platform SIPP.

dunstonh

TCA wrote: »

I have the same sort of pension which is a former works plan. My base charge is 0.6% which I assume was agreed by my old employers. I've been looking at this recently given my balance is now around £100k and pondering whether I'd be financially better off in a fixed fee SIPP with charges possibly as low as £180 p.a. What I've not sussed out yet is the charging at maturity. FL are telling me they have no ongoing charges at maturity whereas that doesn't look the case if I moved to a platform SIPP.

The FL is single charge. i.e. AMC only. Just like most personal pensions. SIPPs tend to have a menu of charges. PPPs are built to be simple. SIPPs built to cater for more complex arrangements.

TCA

dunstonh wrote: »

The FL is single charge. i.e. AMC only. Just like most personal pensions. SIPPs tend to have a menu of charges.

Thanks. The FL charges have become clearer thanks to some changes they've made to what you can see online. Actually seeing month by month charges totalling around £600 per year (of units sold), has made me look closer at my options. Seems a lot.

The £180 p.a. SIPP charge from iWeb looks a decent option on a £100k balance (0.18%) but delving deeper it's still £180 p.a in drawdown. All other things being equal, it looks like I'd need to estimate how long before I access pension benefits and over what period I'd continue to access them.

bowlhead99

Surely comparing £180pa with £600 is not like with like, if the £600 or 0.6% is 'single charge' for the pension investment as dunstonh says.

If you go to a DIY pension provider and pay them £180 just for administering a SIPP wrapper, you are still going to need to buy investment funds to sit inside that wrapper, and there will be a charge for that (from about 0.25% passive to 0.75 or even more on some active funds, but entirely dependent on what you actually hold).

My employer pension (scot widows) is 0.65% which is an all-in cost on their inhouse plans. Whereas my SIPP is 0.25% custody/platform fee on funds (unit trusts / oeics) in addition to the charges for those funds themselves. The SIPP can be cheaper for those investments I have which are not classified as 'funds' (i.e. personally selected shares & investment trusts or ETPs) as the custody fee for those is capped at a lower level, although such choices won't suit everyone.

Pincher

jbagric wrote: »

The IFA that originally helped me set this up is a very good friend of mine, but has now retired. He has, as a favour quickly cast his eye over the plan, hence my comment it needs tweaking. I appreciate his advice and his honesty, and he has advised a review with an IFA.

If you have access to yesterday's Money section, Sunday Times, have a look at the front page.

Highlighted quote:

"We've all paid over the odds but it feels worse when the person who advised you is someone you considered a friend."

They steal the commission the moment you pay the money in, and then if you try to leave, you are hit with a penalty, because the money is gone. £20,000 to leave St James Place.

Same old trick. A colleague recommended Merchant Investors, so I had some trust going in. As it turns out, he was pressured into giving leads. The monthly contributions from the first 18 months are stolen to pay commission, and fund prizes for "Diamond Club" advisers. They filler your account with "initial units", so it looks like you still have money. They then cancel the initial units over the term of the policy. If I try to leave, I don't get the initial units back, only the regular units. Had a weekend to work it all out, cancelled within the cooling off period. Wasted two days off to go through this valuable learning experience.

Friends? I much prefer a bureaucratic unfriendly person who doesn't try to do me a favour, who wants to see my ID to do anything.

dunstonh

To be fair to the OP and his friend, the Friends Life plan was a good plan in its day. It was a low price plan for its era and had a good fund range including the cautious and balanced index fund of funds. Long before the likes of Vanguard and L&G were doing them.

Friends? I much prefer a bureaucratic unfriendly person who doesn't try to do me a favour, who wants to see my ID to do anything.

There is always a risk with friendship when something goes wrong. So, often it is best to take that approach.

TCA

bowlhead99 wrote: »

If you go to a DIY pension provider and pay them £180 just for administering a SIPP wrapper, you are still going to need to buy investment funds to sit inside that wrapper, and there will be a charge for that (from about 0.25% passive to 0.75 or even more on some active funds, but entirely dependent on what you actually hold).

As far as I can see iWeb only charge £60 for pension transfers-in and there are no other ongoing custody fees.