We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

pension charges

hi

I am hoping the IFA on the site reads this.

I have a paid up personal pension with scottish widows , fund value approx £16000. The AMC is max 1% made up of a % amc and a monthly charge.

I am not paying into it because i now work for a company with a Final salary pension.

I will soon have the chance to transfer this pension to the companies other pension scheme , a group PPP. The AMC on this pension will be 0% . I will still be part of the final salary.

I am 36 years old , selected ret age 65.

I was hoping dunstonh could do a calculation to show how much a would save on charges by transfering.

If you wondering why its 0 AMC it is because i work for a life and pension company ( don't want to say on here which )

Thanks

Comments

  • jem16
    jem16 Posts: 19,493 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    PAC wrote: »
    hi

    If you wondering why its 0 AMC it is because i work for a life and pension company ( don't want to say on here which )

    Thanks

    The company concerned might be the most important piece of information in the decision if the investment funds available are poorer than what is available within the Scottish Widows personal pension.
  • hi

    yes .. the 0 AMC is for the internal funds and i would still pay the "extra" AMC if i choose the external funds . There is a total of approx 80 funds ( internal and external )
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    If you move your 16k pension and it grows by an average of 7.5% a year over the 29 years to your retirement date, the fund would be worth 130,306 at maturity with no charges being paid .

    If you leave it where it is, the 7.5% growth will be reduced to 6.5% because of the charges, so the eventual fund value will be 99,370.

    The effect of the 1% charge will be that you lose 24% of the fund value over 29 years.A 1% charge sounds like nothing but over a long period of time it adds up to a very meaningful loss.

    Minimisation of charges (especially percentage-based ones) is a very important aspect of long term investment.

    Congratulations to the OP on spotting the importance of this matter at the start.No doubt he will have a very successful career ;)
    Trying to keep it simple...;)
  • dunstonh
    dunstonh Posts: 118,550 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    The effect of the 1% charge will be that you lose 24% of the fund value over 29 years.A 1% charge sounds like nothing but over a long period of time it adds up to a very meaningful loss.

    Whilst you are at it, work out the loss I have by shopping at Marks and Spencers for food for 30 years.
    Minimisation of charges (especially percentage-based ones) is a very important aspect of long term investment.

    Charges are important but shouldnt be the driver. Is it better to have an investment with 10% potential after 1.5% charges or 7% potential after 1% charges?

    Too many people look at charges first and let that drive their investment decision. That is wrong. Charges are secondary to where you want to invest.

    If the external fund range is available as the OP suggests, then using those in conjunction with the better internal funds would be a very smart move.


    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.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    dunstonh wrote: »


    Whilst you are at it, work out the loss I have by shopping at Marks and Spencers for food for 30 years.



    I don't think anybody minds paying a charge, but do you really feel that losing almost a quarter of a pension's value is fair? The difference here is around 30,000 pounds, that's double the size of the original investment gone in charges. :eek:

    You don't have to pay these charges of course.They are voluntary. :) And investing direct is a darn sight easier these days than growing your own food.
    Trying to keep it simple...;)
  • dunstonh
    dunstonh Posts: 118,550 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I don't think anybody minds paying a charge, but do you really feel that losing almost a quarter of a pension's value is fair?

    Yes. Every retail product has charges and to expect to get it for free is silly. If you look at all the regular purchases you make and then compound those over 30 years as well as puting 7.5% interest on it then everything would look expensive.
    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.
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    PAC, check the available investments and make sure that they have them available in the sectors and regions where you want your money invested. Then check the comparative performance of the two funds to see if the group plan is comparable.

    If they do as well, the lower charges plan makes sense for those.

    If there are any missing sectors you might want to leave money behind for them or cover them in another way.

    You should also compare to the best external funds for the sectors and consider if those offer a better deal due to better performance.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617.1K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.