Allied/Zurich pension charges - general query

Ant555

I have a query about charges on an old Allied Dunbar pension now Zurich.

I have not paid into this for 18+ years and thought it was a reasonable place for existing money but not a good place for any new money (high initial charges already paid but low ongoing charges) - Now I am not so sure!

The latest statement shows charges that it says is in addition to the fund charges.
Capital Unit Charge/Annual Management Charge 0.75%
Capital Unit Charge/Capital Unit Charge 3.50%
Taken together the total of these charges is 4.25% of your capital unit holding value each year.
Accumulation Unit Charge/Annual Management Charge 0.75%
Policy Charge £7.18/month

**Maybe I wasnt paying attention in assuming this was ticking over nicely but from the information I have typed above does it appear that I am paying 4.25% charges on some of my pot?

Value= 80K/100k non protected/protected rights - I hope to retire in 8 years.
There doesnt appear to be an online system with Zurich where I can see my plan.

Any general guidance is much appreciated.

wjr4

How much money do you actually hold in Capital Units vs Accumulation Units? From normal retirement age, the Capital Units are converted to Accumulation units.

Linton

Yes you are paying high charges on what is probably a small part of your pot. You have an old pension that operates a split charges approach.



Rather than pay an initial charge your initial investment is held as Capital Units which are charged at a high rate. All investment gains are placed in Accumulation Unts which are charged at a low rate (for its time). The net effect is that over time the Capital Units disappear and all your money is held as Accumulation Units.


So you dont want to pay new money into the pension. I would be somewhat surprised if you could anyway. The reason why you cant see it online is probably that it runs on software written before the internet and WWW were available, at least to the general public.

Ant555

wjr4 wrote: »

How much money do you actually hold in Capital Units vs Accumulation Units? From normal retirement age, the Capital Units are converted to Accumulation units.

Ahh, I see Capital is worth around £10k - I always wondered why they were listed separately - is it the higher charges on that bit until my listed retirement age of 55 then that money goes back to the normal pot?

I am considering paying for some retirement planning financial advice later on this year but am trying to get to understand as much as I can before that happens.

SonOf

I have not paid into this for 18+ years and thought it was a reasonable place for existing money but not a good place for any new money (high initial charges already paid but low ongoing charges) - Now I am not so sure!

There were versions over the years but some drop the AMC to zero when you cease paying into them. Allied Dunbar plans were heavy on charges against the contributions rather than AMC.

The problem is that the capital units already exist for those that paid into them. And it is those that suffer the heavy charges. If you transfer away under the age of 55, you can suffer significant charges which would not likely be recovered on alternatives (on a like for like basis). You dont avoid those high charges on the capital units by transferring out.

Ant555

Linton wrote: »

The reason why you cant see it online is probably that it runs on software written before the internet and WWW were available, at least to the general public.

Correct - started in 1989 so 30 years anniversary this year.

Back in 1989 with double digit interest rates I thought I would be almost retired now with, I was told, roughly a million quid in the pension pot! ha ha

Ant555

I think I understand this all now so thanks for all the input.

Just to check my understanding on what happens to the capital units at retirement age...

Example using figures @ statement date
Managed AP - unit price = £137.365
Managed Capital AP - unit price = £25.594

At retirement, the number of units in Managed Capital AP are transferred to Managed AP structure so, using example prices above, an immediate increase in their value to the pension pot as their value jumps from £25 per unit to £137 per unit?

TrickyDicky101

No - they will be converted at the prevailing rate (so you need c. 5.5 Capital units per one Accumulation at conversion).

Linton

Ant555 wrote: »

I think I understand this all now so thanks for all the input.

Just to check my understanding on what happens to the capital units at retirement age...

Example using figures @ statement date
Managed AP - unit price = £137.365
Managed Capital AP - unit price = £25.594

At retirement, the number of units in Managed Capital AP are transferred to Managed AP structure so, using example prices above, an immediate increase in their value to the pension pot as their value jumps from £25 per unit to £137 per unit?

Sadly no - 1 Capital unit will buy 25/137 accumulation units. The values will have diverged because of the difference in fee deductions and so an Accumulation unit will represent more wealth than a Capital unit.

Ant555

Thanks - the £ value remains roughly the same in the pot - just a change in the charging structure from then on.

Shame, I thought I had discovered a mini-windfall and potential earlier retirement!


Thanks again - all very useful info.