stakeholder pension fees

Baalmaiden

I have a stakeholder pension which I was expecting to use in 3 years time when I retire. However the fees charged this year were more than the interest my pot earned. I am thinking of taking the pension now and converting it to a drawdown. but will I be hit once more with fees? Would I be better taking an annuity? I'm intending to live to a good age!

dunstonh

However the fees charged this year were more than the interest my pot earned.

Stakeholder pensions don't earn interest.

The drop will almost certainly be due to the markets falling just over 10% in the last month. Nothing to do with charges.

I am thinking of taking the pension now and converting it to a drawdown.

Which will still be subject to investment fluctuations and charges.

Would I be better taking an annuity?

If it is better for your scenario then yes. If it is not then no.

Before you do anything, you really need to up your knowledge on investing. If you plan to use drawdown for the next 20-30 years so, then you are going to have dozens of market corrections, multiple crashes and several large depression style events. You shouldnt really be doing drawdown if you dont understand the basics about investing.

xylophone

You are not earning interest in the stakeholder pension.

Are you now in your early sixties?

Are you currently a member of a workplace pension scheme?

Baalmaiden

OK, I do understand that the pension does not earn interest. I expresses myself badly. Lets put it another way, the pot increased because I made another year's contributions. However the increase due to the investments was less than the fees. If I had paid that money into an ISA it would have grown even at today's rates. I have 2 years to go on my pension and chose a lifestyle investment so the pot should have been put into safer investments as it neared maturity.
I could do as you suggest and learn more about investments but I assumed the guys at Legal and General knew more about it than me.
I am minded to cut my losses and take my pension now rather than in two years time, particularly with the uncertain climate we are in.
What I wanted to know was, if I put my pot into a drawdown product, would I pay yearly fees? I assume so as no company has a product that earns them nothing. If they do charge a fee, is it a flat percentage of the total pot, which is what I'm paying now, or a percentage of the earnings on the pot.
If I choose an annuity, will there be charges or a setting up fee or both?
It strikes me that L&G do very well because they get paid whether your pot does well or badly. Even if it goes down they still get that yearly fee.
I chose this stakeholder because it was recommended by Which? at the time.

cloud_dog

Ignoring this years 'abhorrent' situation, what was the growth (excluding contributions) last year, and the year before?

Also, is it possible that your investment is invested in some sort of lifestyling / retirement styling sort of fund, i.e. growth is not the principle aim at your stage of life, hence the reduced returns? (although I'm with the others, it is all about the recent stock market falls).

Albermarle

What I wanted to know was, if I put my pot into a drawdown product, would I pay yearly fees? I assume so as no company has a product that earns them nothing. If they do charge a fee, is it a flat percentage of the total pot, which is what I'm paying now, or a percentage of the earnings on the pot

Normally all pensions of this type have two fees, which are calculated as a % of the total pot . One fee for the pension provider and one fee for the funds the money is actually invested in . Sometimes when the pension provider is also the fund provider ( which sounds like your case) it can sometimes be rolled up into just one fee.
When you move into drawdown there will probably a similar level of charges if you stay with L&G.
Other pension providers can have different charging structures - such as a flat fee rather than a % but then there will probably be seperate charges for each with withdrawal for example.
I do not think any provider has a charge related to the actual investment returns .

dunstonh

I could do as you suggest and learn more about investments but I assumed the guys at Legal and General knew more about it than me.

L&G are not picking your investment funds. Either you or your adviser does that. L&G will invest within the remit of the fund you pick.

I am minded to cut my losses and take my pension now rather than in two years time, particularly with the uncertain climate we are in.

What losses? (i suspect you have not lost a penny)
What uncertain climate?

What I wanted to know was, if I put my pot into a drawdown product, would I pay yearly fees?

Of course you will. Nobody is going to offer you their product for free. Plus, it still doesnt get around the fact that you need to have at least a basic knowledge of investing. Otherwise, you are just going to be making the same mistakes in the future.

If I choose an annuity, will there be charges or a setting up fee or both?

yes

It strikes me that L&G do very well because they get paid whether your pot does well or badly. Even if it goes down they still get that yearly fee.

They are paid for doing their job. They are not responsible for the volatility that occurs every day. They have absolutely no control over global markets. The can micromanage some things but the bulk of it will follow the market up or follow the market down. As values go up and down daily, it is pointless looking at a period of a few months of loss in a decade of growth

I chose this stakeholder because it was recommended by Which? at the time.

Which? have never been that good when it comes to financial products. L&G have never issued the best stakeholder from they stakeholders were introduced in 2001 or when stakeholders started going out of date from 2007ish onwards. Maybe its time to get some real advice?

xylophone

It would be possible to transfer the pension to a SIPP, hold it in cash, take the PCLS and then draw down over the next couple of years or more as best suits your tax situation.


HL do not charge for holding cash.

Remember that anything over the PCLS will be taxed as income in the year of receipt.

Baalmaiden

Thank you for your replies. I am indeed in a Lifestyle plan.
The previous year the Equities part of the pension made a loss and the cash part made a profit whereas this year the opposite happened. I think the next two years are too short a period to be sure what will do well so I am getting out with what I have in the pot now and will get some independent advice on how to get an income from it.

cloud_dog

What are you planning on doing?

If you are planning to buy an annuity then the situation appears to be what would be appropriate.

If you are not going to buy an annuity, i.e. use drawdown, then possibly the investment choice you have may not be appropriate.

Thrugelmir

Baalmaiden wrote: »

Thank you for your replies. I am indeed in a Lifestyle plan.
The previous year the Equities part of the pension made a loss and the cash part made a profit whereas this year the opposite happened. I think the next two years are too short a period to be sure what will do well so I am getting out with what I have in the pot now and will get some independent advice on how to get an income from it.

Hence the lifestyling aspect of the plan. Your invested funds will be progressively reallocated down the risk scale. Reducing volatility year on year.