PensionBee Q&A

cloud_dog

In PensionBee' defence, dunstonh explanation (welcome back btw) does explain why they stated 100% protection; that is how they have interpreted the guidance.

Whether that interpretation is correct or not will only ever be confirmed if an event were to arise to trigger the legal entities to debate and offer a position.

Very unsatisfactory from a consumer protection perspective but at least I now have a fuller understanding.

DavidSte123

For a fee structure I'd like to see a no win no fee kind of fee.

I find it frustrating when there's a downturn in the market that commission is still taken from my pot, effectively rewarding failure.

A good structure would be to have a minimum gain threshold (either an absolute amount or a percentage or a mix) above which the fee is paid.

I'd be happy to pay a higher commission knowing that I only pay it when my pension has had a good return.

It should also be relative to the total value of the fund rather than just the gain, to avoid short term investment strategy. Or maybe relative to a 3 or five year performance.

Malthusian

DavidSte123 wrote: »

For a fee structure I'd like to see a no win no fee kind of fee.

I find it frustrating when there's a downturn in the market that commission is still taken from my pot, effectively rewarding failure.

If the market goes down PensionBee has failed at nothing.

Did you expect them to switch all your pension into cash before the market crashed? If PensionBee could do that, they would be charging a hell of a lot more than 0.5% per annum and every investor in the country would be beating down their door. The reality is that no-one can time the market and any firm that tries it will lose their investors money.

I'd be happy to pay a higher commission knowing that I only pay it when my pension has had a good return.

No you wouldn't. Performance fees are a rip off. When investing for the long term, you need the growth in good years to cancel out the falls in value in bad ones. However, funds which charge performance fees skim off growth in the good years (typically 20% of growth over a certain threshold), and they don't give you money back in bad years, so the good years are no longer compensating for the bad ones as they should.

Performance fees are only acceptable if you are in a private equity fund investing in early stage companies to generate unicorn-type returns. If the fund multiplies your money by 10x you don't mind so much if the manager gets 20% of most of that. For mainstream investments, funds with performance fees nearly always underperform.

A percentage fee (which is what PensionBee charges) is sufficient incentive for the manager because the bigger your pension gets, the bigger their fee is.

dunstonh

I find it frustrating when there's a downturn in the market that commission is still taken from my pot, effectively rewarding failure.

How is a market downturn a failure?

A good structure would be to have a minimum gain threshold (either an absolute amount or a percentage or a mix) above which the fee is paid.

I'd be happy to pay a higher commission knowing that I only pay it when my pension has had a good return.

Excellent way to introduce risk bias and increase the charge you pay. Really awful way to maintain suitability though.

Alexland

Malthusian wrote: »

Performance fees are a rip off. When investing for the long term, you need the growth in good years to cancel out the falls in value in bad ones. However, funds which charge performance fees skim off growth in the good years (typically 20% of growth over a certain threshold), and they don't give you money back in bad years, so the good years are no longer compensating for the bad ones as they should.

Orbis charge a performance fee when they outperform their benchmark and refund fees when they underperform. They even absorb the fund administration costs so if they only match the benchmark they are losing money. Annoyingly their strategy has beaten the MSCI World benchmark (although they probably do take more risk) by an average of 4% per annum since 1990 so can afford to risk giving fee refunds as it doesn't happen much.

https://www.orbis.com/uk/individual/our-fees/

Alex