Some help and info on Canada Life Pension and charges

becmon

I will admit upfront I know very little about Pensions.

My husband took out a private pension with Canada Life on the advice of his IFA approximately 21 years ago. It was a Canada Life Series 4 Pensions fund and it was invested into the Canlife Multiple Investment fund. He started off paying quite small amounts in to the pension as he had just started his own business back then but they have escalated each year. His contributions currently are about £350 per month (I have told him he needs to look at increasing this).

I decided to have a look at it when he received a letter in June stating that his policy would be transferred to Scottish Friendly and asked for further details of the plan from Canada Life. My husband has made contributions totalling £41,847.42 and the transfer value is currently £57,403.85. I am happy to be told I am wrong but there does not seem to have been a huge amount of growth considering the time period?

I looked into things a bit further and I think the charges might be considered high.

According to the factsheet ' there is a 5% difference between the price at which units are bought (offer price) and sold (bid price). The charge is only paid when buying units'. Would someone mind explaining what this means and what impact it has?

The annual Management charge is 1% on accumulation units, the AMC is allowed for when the unit price of the fund is calculated - could anyone also explain what this means?

The Investment management charge is 0.4% on the Canlife Multiple Investment Pn PS4 initial - I understand what this charge is.

I would be interested in peoples views on this pension and the charges.

We can transfer the pension into a different fund with Canada Life but the choice is very limited. There isn't a fee charged for one fund switch in a year.

There is a loyalty bonus attached to the plan (I am not sure exactly how to work out and consider the impact of this on the pension) and no transfer penalty.

My husband is not looking to retire for at least another 20 years probably more. Is this pension something to stick with or is it worth considering transferring it and getting further advice on doing so?

Many thanks for your help

Linton

becmon wrote: »

I will admit upfront I know very little about Pensions.

My husband took out a private pension with Canada Life on the advice of his IFA approximately 21 years ago. It was a Canada Life Series 4 Pensions fund and it was invested into the Canlife Multiple Investment fund. He started off paying quite small amounts in to the pension as he had just started his own business back then but they have escalated each year. His contributions currently are about £350 per month (I have told him he needs to look at increasing this).

I decided to have a look at it when he received a letter in June stating that his policy would be transferred to Scottish Friendly and asked for further details of the plan from Canada Life. My husband has made contributions totalling £41,847.42 and the transfer value is currently £57,403.85. I am happy to be told I am wrong but there does not seem to have been a huge amount of growth considering the time period?

Over the past 10 years the fund's performance seems typical for ones of the same type with an average return of about 6% per year. One reason the returns may seem low is that although the investment has been running for 21 years, because of the increase in contributions over time more than half the £41K has been invested for less than 10 years. Also there were 2 major crashes in the first 10 years.

I looked into things a bit further and I think the charges might be considered high.

According to the factsheet ' there is a 5% difference between the price at which units are bought (offer price) and sold (bid price). The charge is only paid when buying units'. Would someone mind explaining what this means and what impact it has?

If a unit costs £10 to buy, someone selling the unit at the same time will receive £9.50.

The annual Management charge is 1% on accumulation units, the AMC is allowed for when the unit price of the fund is calculated - could anyone also explain what this means?

The AMC pays the cost of running the fund - salaries, computers, office space etc. But you never see that payment as it is incorporated into the value of the units. So each year the fund is 1% lower in value than it would have been had people worked for free, with free office space etc.

The Investment management charge is 0.4% on the Canlife Multiple Investment Pn PS4 initial - I understand what this charge is.

I would be interested in peoples views on this pension and the charges.

We can transfer the pension into a different fund with Canada Life but the choice is very limited. There isn't a fee charged for one fund switch in a year.

There is a loyalty bonus attached to the plan (I am not sure exactly how to work out and consider the impact of this on the pension) and no transfer penalty.

My husband is not looking to retire for at least another 20 years probably more. Is this pension something to stick with or is it worth considering transferring it and getting further advice on doing so?

Many thanks for your help

You could move to a fund with a higher % in equity. Your current fund is about 70% shares and 30% safer investments. Increasing the % shares to 100% would provide better performance in the good times but lead to greater falls in the bad one. Overall it should give a higher return. Also the CL fund has a high % invested in FTSE100 companies. The FTSE100 has been possibly the worst performing major index for many years. A modern fund would be likely to have a smaller % in the UK.



The charges and the bid/offer spread are high compared with modern funds. You could improve on all the charges, but the effect will be helpful raher than life-changing. However you need to determine whether it is worthwhile giving up the bonus.


The main difference will come from increasing contributions. Only having £57K in your pension after 25? years of working is not good.

becmon

Hi Linton

Thank you very much for your reply.

You're right he started off paying only £50 a month and it has only gradually increased each year. He has never paid more than the 5% escalation or added in any lump sums.

Thank you for the explanation on the charges - not as bad as I feared. I expect he will prefer to keep it running and increase the contributions or maybe look at an additional pension to add additional monies into instead. I will also have a look at the other funds available within his pension to see if they are less UK focused but off the top of my head there are only a few mixed investment funds available.

£57,000 is not a great deal, we have mainly been concentrating on paying off the mortgage ( I now realise we have got this the wrong way round) and getting a couple of businesses up and running. The Mortgage is now all but paid off and the businesses generate an income without being reliant on his labour so its now time to focus a bit more on investing for the future.

Thank you again

Ganga

If he continues paying in the £350 a month for the next 20years he will pay in another £84,000 which is £141000 plus growth.