Fund AMC% Government regulations

Cypruseast

I was looking some advice or to be pointed in the direction of some specific legislation around Pension fund AMC rules. 

According to my pension company the government has a rule that you can’t be charged more than 1% a year (in total) to invest in a stakeholder pension product. I have been advised that one of the funds that I have invested in and had built up a very significant sum of money in and has performed incredibly well (+100% in the past 12 months) has exceeded the 1% cap and as such I am no longer able to invest in this fund and whilst they will continue to offer it under my specific pension fund, allegedly as I’ve been in the stakeholder fund for over 10 years I am no longer able to continue to invest in it. 

I am slightly gobsmacked tbh. I have a limited number of approx. 50 funds I can choose from and this is one of only 2 North American funds available with the other performing at levels miles behind what the fund I had selected was achieving. 

The breakdown of the AMC % is 0.45% fund charge, 0.54% scheme fee and 0.03% additional fund expense. So overall 1.02%.

I assume this is the correct course of action by my pension scheme but why is this in place and surely given we live in an inflationary world there is a chance that other funds will find themselves in a similar  position and will limit customer choice? I am happy to pay that % fee as I feel the performance justifies it but I am being prevented from doing so. 

Am I also right in saying that if you are in the first 10 years of a scheme that this doesn’t apply? 

I am so frustrated by this and am keen to know if there is any redress means of negotiating this with the stakeholder provider to review their fees. 

Thanks in advance 

TVAS

I don't believe anything corporate say so I would complain and take it to the Ombudsman. Stakeholder is a 1% cap so I have no idea what they are talking about. Non Stakeholder the cap is 0.75%. You might want to consider transferring to a cheaper provider and funds such as Vanguard but complain first see what happens. 0.56% scheme fee thieves! Research other providers as well. Good luck.

Thrugelmir

What's the fund? 

Does the investment manager earn a performance fee ? 

If the fund has grown over 100%. Then is actively managed not a passive tracker. 

jamesd

Cypruseast said:

has exceeded the 1% cap and as such I am no longer able to invest in this fund and whilst they will continue to offer it under my specific pension fund, allegedly as I’ve been in the stakeholder fund for over 10 years I am no longer able to continue to invest in it. 

"Annual management charges must not be more than 1.5% per year for the first ten years of scheme membership and then not more than 1% thereafter" so you were able to invest in it until at the ten year point the cap was reduced.

Ask them if you can open another stakeholder pension with them with a new pension's 1.5% cap which you can use to buy more.

xylophone

According to my pension company the government has a rule that you can’t be charged more than 1% a year (in total) to invest in a stakeholder pension product. 

https://www.pensionbee.com/pensions-explained/pension-types/what-is-a-stakeholder-pension

https://www.legalandgeneral.com/_resources/pdfs/pensions-retirement/pensions/SHP_Key_Features.pdf

https://lib.standardlife.com/library/uk/spp17.pdf

https://www.aviva.co.uk/adviser/documents/view/sp01001c.pdf

https://www.pru.co.uk/pdf/SHPK0337.pdf

Thrugelmir

jamesd said:

Cypruseast said:

has exceeded the 1% cap and as such I am no longer able to invest in this fund and whilst they will continue to offer it under my specific pension fund, allegedly as I’ve been in the stakeholder fund for over 10 years I am no longer able to continue to invest in it. 

"Annual management charges must not be more than 1.5% per year for the first ten years of scheme membership and then not more than 1% thereafter" so you were able to invest in it until at the ten year point the cap was reduced.

Ask them if you can open another stakeholder pension with them with a new pension's 1.5% cap which you can use to buy more.

That doesn't resolve the issue of offering the underlying investment for the provider. 

dunstonh

According to my pension company the government has a rule that you can’t be charged more than 1% a year (in total) to invest in a stakeholder pension product.

Technically not correct.  SHP rules are that you cannot be charged more than 1.5% p.a. for the first 10 years and then no more than 1% thereafter.  Most SHPs are at 1% or less.

I have been advised that one of the funds that I have invested in and had built up a very significant sum of money in and has performed incredibly well (+100% in the past 12 months) has exceeded the 1% cap and as such I am no longer able to invest in this fund and whilst they will continue to offer it under my specific pension fund, allegedly as I’ve been in the stakeholder fund for over 10 years I am no longer able to continue to invest in it. 

Fees are 1% of the fund value.  So, regardless of the value movements, it always remains within 1%.

The breakdown of the AMC % is 0.45% fund charge, 0.54% scheme fee and 0.03% additional fund expense. So overall 1.02%.

The additional fund expense is an EU directive.  A paper exercise and the 1% does not apply to that.

I assume this is the correct course of action by my pension scheme but why is this in place and surely given we live in an inflationary world there is a chance that other funds will find themselves in a similar  position and will limit customer choice? I am happy to pay that % fee as I feel the performance justifies it but I am being prevented from doing so. 

The way you have described it indicates an incorrect interpretation.

I am so frustrated by this and am keen to know if there is any redress means of negotiating this with the stakeholder provider to review their fees. 

Stakeholder pensions are largely obsolete and you would likely be better on a modern pension. Especially if yours is still charging 1%

Cypruseast

Thanks for all the comments. I’ll try and answer a few of them here. 

The scheme provider is Aviva and in their correspondence they state as their opening gambit and I quote “The pension product you have with us is a Stakeholder Pension. Government rules state that you can’t be charged more than 1% a year (in total) to invest your pension savings in a stakeholder pension.”

They then go on to state they review the charges taken to ensure they comply with the regs. They then state that the charges taken as part of one of my funds Baillie Gifford American  have resulted in my policy exceeding the 1% charge cap. Apologies, blah, blah etc....

They very kindly ;-) offered to put me in a Blackrock 50:50 global fund or I can choose to invest in alternatives open to me. 

They specifically detail in the correspondence that the breakdown down of the fund charges is as per below: 

Fund charges: 0.45% (plus your scheme fee of 0.54%)
Additional Fund Expenses: 0.03%
(Please see pic).

Interestingly when I view the Funds and Unit Prices of the various funds open to me they have the Baillie Gifford American fund registered with a 0.99 AMC%. (Again see pic).

Dunstonh if you don’t mind me asking is there anywhere you can point me in the direction to get more info about the additional fund expenses being an EU directive and that not being applicable? That may be the angle to get them on this!! 

dunstonh

Thank you for the additional info.   You have some funds that are not typically included in stakeholder pensions as they would not comply with the charge cap.  BG American is an anomaly that shouldn't really be there and Aviva is removing it as it isnt going to be able to stay under 1% without then subsidising this.

You have no angle on this.   If they are pulling the fund then its gone and cannot be kept.   

jamesd

Thrugelmir said:

That doesn't resolve the issue of offering the underlying investment for the provider. 

"they will continue to offer it under my specific pension fund" suggests that they are, just not beyond ten years.