Where to start when comparing pensions (Zurich & Aegon)

MardyBum

Hello all

On my list of financial housekeeping tasks for this year is to finally review and get a handle on my private pensions.

I'm self-employed, probably at least 15 years off any retirement, and have two pensions which I’ve been contributing to for years, but I want to get a better understanding of how to compare them. Ideally so I can figure out if I should be changing how I contribute to them or even if I should move/combine them etc.

A such I was just looking for any tips or things to look out for from anyone who's previously compared their pensions. Or if it's a lost cause for a layperson and I just need professional help (financial advisor-wise!)

I'm guessing it's (relatively) straightforward to compare the performance of each fund. But from what I've read it’s the fees that are a main aspect to compare. I’ve got my recent statements, and the charges sections are very different, so I don’t know if I'm missing some key details that I need to get hold off.

I've summarised what I've found with each pension below and would be grateful for any guidance or starting points if you've been through a similar process.

Cheers

Pension 1 - Zurich Adaptable Pension Plan

I’ve had this setup for about 25 years ago when I first started working and it was originally an Allied Dunbar policy. Contributions are index linked so creep up every year and now about £200 a month.

Holdings is 100% 'Managed 1% AP' (0035994 SEDOL) - Fund charges 0.18%, transaction costs 0.32%.

Annual charge 1% per year, then says refund of annual charge 1% per year "added back into your plan by Zurich to offset the annual charge. This only applies during the period in which regular payments were expected to be paid."

Policy charge £8.43 per month and increases each year with inflation.

Charges on payments into your plan - "These are the charges applied to payment into your pension and vary depending on your plan status and the amount paid in. Charges of £11.25 were applied to your most recent payment."

Waiver of Contribution - Benefit linked to the level of payments and costs £4.50 per month.

Pension 2 - Aegon Flexible Pension Plan

When I was employed, this was my workplace pension which my employer and I contributed to. When I left employment about 10 years ago it got converted to a personal plan and I contribute £100 a month into it.

Holdings is 100% 'Universal Lifestyle Collection*' (3144961 SEDOL) - Yearly charge 0.74%, Yearly fund charge rebate 0.48%.

"*Denotes funds with additional management expenses. The yearly charge is shown after the rebate has been applied."

Fund value rebate of 0.25% applied yearly when the plan value is more than £50,000.

Albermarle

Pension 2 is costing you 0.74% pa , unless you have over £50K in it, then there is a further discount of 0.25%

Pension 1 charges are a bit impenetrable !

More important than charges is how the funds are performing and that they are appropriate for you.

I do not know what Managed 1% AP is 
The Aegon fund is a lifestyle one that derisks as you get near retirement age, which can be good or bad.

As a general point it is often a good idea to transfer out of very old pensions, as they tend to be inflexible when you want to withdraw from them, with limited options.

A such I was just looking for any tips or things to look out for from anyone who's previously compared their pensions. Or if it's a lost cause for a layperson and I just need professional help (financial advisor-wise!)
It is good you have started looking, although at first it no doubt looks a bit complicated.
I can only say that this forum has many regular contributors who also probably only started looking at their pensions as they got older, so its a familiar journey ! Reading the forum regularly will help you get more in the swing of pensions and investments.
Employing an independent FA is one route to take.
They will cost money but they may well save you money. You do not say the size of your funds, as there is a minimum amount needed to get an IFA interested.
In any case even if you employ an IFA, the more you understand yourself the more you will get out of the relationship. If you know enough you can go it alone and become a DIY investor.

dunstonh

Both the Aegon plan and the Zurich plan are legacy plans from a different era.   Both can usually be improved on with modern plans.  Although some of those old AD plans were heavy on charges when you were contributing but dirt cheap when made paid up.   The AD multi-charge methodology requires software to compare.

MardyBum

dunstonh said:

Both the Aegon plan and the Zurich plan are legacy plans from a different era.   Both can usually be improved on with modern plans.  Although some of those old AD plans were heavy on charges when you were contributing but dirt cheap when made paid up.   The AD multi-charge methodology requires software to compare.

Thank you both for the guidance and insights. It appears the Zurich pension charges are near undecipherable which doesn't fill me with confidence.

I think I have managed to track down and compare the funds performance, but it sounds like both pension plans might be past their sell by date.


 
Just a question on them being classed as 'legacy plans'. Are they considered this because most modern plans are cheaper, wider/better fund choices, more flexible at retirement, all of the above?

hotncold47

I also had AlliedDunbar/Zurich "Legacy"pension, drawdown was not possible neither was Inspecie transfer. Everything had to be sold so I could move it into a sipp.

MardyBum

hotncold47 said:

I also had AlliedDunbar/Zurich "Legacy"pension, drawdown was not possible neither was Inspecie transfer. Everything had to be sold so I could move it into a sipp.

Did you have to do anything special to transfer the Allied Dunbar/Zurich pension to a SIPP provider? Or was it just limited transfer options and take a while? Thanks

dunstonh

MardyBum said:

hotncold47 said:

I also had AlliedDunbar/Zurich "Legacy"pension, drawdown was not possible neither was Inspecie transfer. Everything had to be sold so I could move it into a sipp.

Did you have to do anything special to transfer the Allied Dunbar/Zurich pension to a SIPP provider? Or was it just limited transfer options and take a while? Thanks

Inspecie doesnt apply to pension funds.  That is why they couldn't do inspecie.   You don't need to do anything special.

JohnWinder

I want to get a better understanding of how to compare them.’

I think that’s the lesser important thing to do. More important, and you referred to it, is whether you should move them to something more suitable (and likely there is such a beast).

That takes you to the heart of personal investing, which any sensible person can do well themselves, and it’s what are the right assets and how much of each is most suitable for your particular circumstances and temperament. You figure that out by getting familiar with the nature of equities, bonds, cash, gold or whatever asset might help you, and then you choose the products (pension plans from Aegon et al) that fit your needs.

The book you need to guide you through all that is Tim Hale’s Smarter Investing, likely at your local library. It could be the only book you’ll need, and you’ll feel a lot more confident having read it. You can have a good taste of it at google books.

‘I'm guessing it's (relatively) straightforward to compare the performance of each fund.’

I wouldn’t even bother, for the reason above, added to which, the past performance does not tell you about future performance. Read this week’s summary of two academic papers if you want an eye opener about that https://www.ifa.com/articles/what_chances_picking_winning_funds_ante
Yes, fees are very important, and them being opaque is a big turn-off. But before agonising over fees, determine what might be a suitable asset allocation for you (as above), then see what pension products might fit the bill, then look at the fees.
Allow yourself 6-12 months to get a handle on all this; time well spent with 15 years to retirement and another 20 years of investing to fund the retirement.
Good luck.