Royal London fees - sanity check my understanding please

Qyburn

Hi,

I have a small Royal London pension from a former employer. Fees always used to be noted as 0.65% plus "transaction costs" which equates to around another 0.06%. Since I left that employment I made a one-off contribution which slightly more than doubled the value. At that time RL quoted charges of 1.10%. It's not quite clear whether that applies to money added or to everything but either way it's a price rise.

My thinking is that this is now looking more expensive than DIY. Let's say I transferred to Hargreaves Lansdown, I'd be paying 0.45% for the platform, and around 0.20% for a multi asset fund making a total of 0.65%. Or less with AJ Bell or Vanguard.

Am I making valid comparisons, or have I missed anything?

For background I intend to keep paying in £2,880/3600 each year and keeping the plan as savings hopefully keeping up with inflation. It doesn't form part of my retirement income plan.

AlanP_2

Employers typically get a discount against list price fees from the likes of RL. 

This may now have disappeared as you are no longer in their employment.

Ask RL for an explanation, I have always found them very helpful.

dunstonh

Fees always used to be noted as 0.65% plus "transaction costs" which equates to around another 0.06%.

Most people ignore the transaction costs figure as it is not an explicit charge but a synthetic calculation that can use multiple methods that result in different outcomes.

Since I left that employment I made a one-off contribution which slightly more than doubled the value. At that time RL quoted charges of 1.10%.

Most modern RL contracts have a base charge of 1.0% but then are discounted based on the size of the fund value and auto-enrolment requirements.   Then you have the mutual bonus every year which doesnt show against charges but is effectively a rebate.

Schemes used to be able to remove the employer/AE discount when you ceased to be an active member but that was banned several years ago.   However, it was not retrospective.  i.e. if the discount had already been removed then it was not required to put it back.

Where are you getting 1.1% from?   The maximum charge on internal RL funds is 1.0%

Qyburn

dunstonh said:

Where are you getting 1.1% from?   The maximum charge on internal RL funds is 1.0%

I may be misunderstanding, which is the reason for posting. I got that figure from the certificate after I made the contribution. I've cropped off most of the huge list of funds as they all say 1.10% ..

dunstonh

I may be misunderstanding, which is the reason for posting. I got that figure from the certificate after I made the contribution. I've cropped off most of the huge list of funds as they all say 1.10% ..

You are not misunderstanding.  However, both of those funds have a 1.0% AMC as default before discounts.  So, you are suffering a loading to the default.

If this is an old GPPP (old means pre 2013 in this case) then the charge could be due to the original agent loading it for renewal commission.        A post RDR (2013) contract cannot do that but a plan set up before RDR can.

Albermarle

Schemes used to be able to remove the employer/AE discount when you ceased to be an active member but that was banned several years ago.

I had an issue with new contributions to an old Standard Life employer pension. The discount on new contributions was lower than on the existing pot ( which still had the previous employer discount) . I only found out after noticing my average charge was creeping up ( luckily SL make their charges very clear on their app).

As this had never been mentioned to me, even during a telephone call on the specific subject, I complained.

Eventually got a compensation payment and agreement on old discount for new contributions. 

Qyburn

dunstonh said:

I may be misunderstanding, which is the reason for posting. I got that figure from the certificate after I made the contribution. I've cropped off most of the huge list of funds as they all say 1.10% ..

You are not misunderstanding.  However, both of those funds have a 1.0% AMC as default before discounts.  So, you are suffering a loading to the default.

Cheers. Previous document, while I was still employed, showed 0.65% both as the overall management charge, and against each individual fund managers so they've upped their prices, and it seems to have been triggered by the contribution.

dunstonh

Qyburn said:

dunstonh said:

I may be misunderstanding, which is the reason for posting. I got that figure from the certificate after I made the contribution. I've cropped off most of the huge list of funds as they all say 1.10% ..

You are not misunderstanding.  However, both of those funds have a 1.0% AMC as default before discounts.  So, you are suffering a loading to the default.

Cheers. Previous document, while I was still employed, showed 0.65% both as the overall management charge, and against each individual fund managers so they've upped their prices, and it seems to have been triggered by the contribution.

I don't think RL have upped it.   RL's default charge with no discount is 1.0.  You have 1.1.    In my experience, the only way to get higher than the default is to have an intermediary charge on top.   On post 2013 pensions, that would normally show separately.   On pre 2013 contracts it would be bundled as the total charge.      In this case, the group PPP start date dictates that.  Not the date you joined.

I think you have a pre-RDR GPPP with old fashioned charges which would not only be bettered by a modern RL PPP but also other modern alternatives (in respect of charges)

JoeCrystal

if I remember correctly, you need to bear in mind that Royal London can and do charge different rate based on ongoing contributions and one-off contributions. If you read that section, The charge will vary as the proportion of your single contribution invested in each fund changes.

In your case, let say you accrued £10k from the monthly contributions. That will still get 0.65% management charge. Then, later on, you decided to invest £10k as a single contribution; that would be a 1.10% charge.

So since you had the equal amount, it would be a case of 50% of your pot would be charged at 0.65% and other 50% of your post would be charged at 1.10% instead.

That is my understanding from reading your document.

Qyburn

dunstonh said:

I think you have a pre-RDR GPPP with old fashioned charges which would not only be bettered by a modern RL PPP but also other modern alternatives (in respect of charges)

Cheers, it could easily be the case that the company set up the plan before 2013. In reality I don't think it matters much how the current charges arose. As long as I know I'm comparing apples with apples I think this might push me into transferring. 

Beddie

Qyburn said:

dunstonh said:

I think you have a pre-RDR GPPP with old fashioned charges which would not only be bettered by a modern RL PPP but also other modern alternatives (in respect of charges)

Cheers, it could easily be the case that the company set up the plan before 2013. In reality I don't think it matters much how the current charges arose. As long as I know I'm comparing apples with apples I think this might push me into transferring. 

As someone else said, speak to RL and they can probably move you to a more competitive plan there and then with no hassle. They have excellent customer service in my experience.