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Pension Charges: What is reasonable?
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BigDonut
Posts: 291 Forumite
Hi All,
The company I work for is currently setting up access to pensions for employees.
I was given my illustration by the IFA and was wondering about the charges.
It is a non-stakeholder plan.
It has an initial fee (taken out of the first years payments) which is paid to the IFA and then an on going management charge.
It seems ok but as this is the world of moneysavers I think its important to look at charges on the pension fund. a 0.1% difference in charges could have a big effect on final pension amount.
Thanks
BD
The company I work for is currently setting up access to pensions for employees.
I was given my illustration by the IFA and was wondering about the charges.
It is a non-stakeholder plan.
It has an initial fee (taken out of the first years payments) which is paid to the IFA and then an on going management charge.
It seems ok but as this is the world of moneysavers I think its important to look at charges on the pension fund. a 0.1% difference in charges could have a big effect on final pension amount.
Thanks
BD
0
Comments
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Too many people focus on a the differences of 0.25% on annual management charges but take no interest in the investment element where 5%-10% can be the difference. A 0.1% percentage difference really makes diddly squat in the scheme of things. Investment returns move more than that in a day.
Modern personal pensions tend to offer the stakeholder funds at stakeholder pricing but also external funds with slightly higher annual management charges.
Group personal pensions can range from being easy to manage to being really awkward. I have known some IFAs become swamped with admin from larger schemes and not make enough out of it to be justifiable. Others have set them up and the employer does all the work. So, there is really no standard here and its up to the employer to agree the service standards and how much the charges are.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thanks dunstonh.
I appreciate that the annual management charge differences can easily be outweighed by a good choice of investments
I also appreciate that it needs to be cost effective from the IFAs perspective otherwise there is no incentive to advise on pensions.
I should spend more time reading about funds and potential investment strategies rather than worrying about the management charge.
I suppose I wanted to make sure that I was not getting a bad deal with the scheme.0 -
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EdInvestor wrote: »And these charges are?
Sorry I didn't have them to hand when posting the thread.
The cahrges are:
50% of the first years payments to the IFA
then an ongoing management charge of 0.75%0 -
Charges seem fair. 0.75% amc is better than the 1-1.5% typical. The first year reduction gets the cost out of the way so you arent paying for it for all the years until retirement.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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Is the employer paying money into this pension, if so how much?
What company is providing it?
What is the fund choice? Has the IFA advised you on which funds to choose?Trying to keep it simple...0 -
EdInvestor wrote: »Is the employer paying money into this pension, if so how much?
What company is providing it?
What is the fund choice? Has the IFA advised you on which funds to choose?
I'll check up on the provider..Scottish life or something like that rings a bell
What do you mean by the fund choice? do you mean the range of duns available to choose from?
if so I think there are some of the pension ompanies own funds but alos other companies funds. Artemis and jupiter were mentioned. All in all I think there was ~150 choices of funds.
There was also the option of choocing self-managed or managed portfolios. i.e. they pick funds suitable to your attitude to investment and continually monitor/change these as neccessary0
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