MSE News: 'Rip-off' pension charges targeted by Government

"The Government is considering banning all pension charges above 0.75% a year..."
Read the full story:

'Rip-off' pension charges targeted by Government

OfficialStamp.gif


Click reply below to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.
«1345

Comments

  • dunstonh
    dunstonh Posts: 116,031
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    It would make SIPPs largely unworkable as they offer investment from the market place and charges on those can be higher than the 0.75%.

    However, on personal pensions using internal pension funds, it is unusual for find a pension fund higher than 0.75%. So, with most modern plans already lower than that for internal funds, it wont really make any difference.

    The only damage is if they extend it to external funds or SIPPs or whole of market personal pensions where consumer choice would be limited by this.
    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.
  • sandsy
    sandsy Posts: 1,716
    Name Dropper First Anniversary First Post
    Forumite
    The proposal only applies to auto-enrolment schemes which are unlikely to be SIPPs.
  • dunstonh
    dunstonh Posts: 116,031
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    sandsy wrote: »
    The proposal only applies to auto-enrolment schemes which are unlikely to be SIPPs.

    I agree but there are a couple that operate in that field. That includes a provider that this site typically endorses. It is somewhat ironic that this site promotes a platform provider in one article but then refers to their charges, indirectly, as rip off in another article. ;)
    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.
  • What makes me angry is the fact that if you are widowed they claw back half of your spouses pension.
    Blessed are the cracked for they are the ones that let in the light
    C.R.A.P R.O.L.L.Z. Member #35 Butterfly Brain + OH - Foraging Fixers
    Not Buying it 2015!
  • Linton
    Linton Posts: 17,061
    Name Dropper First Post First Anniversary Hung up my suit!
    Forumite
    What makes me angry is the fact that if you are widowed they claw back half of your spouses pension.
    Que??

    With an annuity you decide what % you want as a spouses pension. Obviously the more you have as a surviving spouses pension the less you get in the base pension.
  • hugheskevi
    hugheskevi Posts: 3,782
    First Anniversary Name Dropper First Post Car Insurance Carver!
    Forumite
    edited 30 October 2013 at 8:21PM
    The consultation only asks about capping the charge on the default fund in an automatic enrolment scheme, so a SIPP could be fine as the workplace pension even if there was a charge cap.

    Interesting to read in the MSE report (acknowledging they seem to just be passing on a Press Association report) that:
    The Department for Work and Pensions (DWP) is considering banning all pension charges above 0.75% a year

    Would be interested to know what legislation DWP has that can achieve that, I would have thought that would be HMRC/HMT legislation (DWP only has workplace pension legislation). Still, small details and best not to go into too many details, far better to glibbly talk about rip-offs :)
  • dunstonh
    dunstonh Posts: 116,031
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    I thought I had missed something when I read the MSE article and said ALL funds.

    This consultation is a bit of a waste of time though in that particular aspect as you would find it hard to see a default fund on a modern contract that is above 0.75% on an auto-enrollment scheme.
    far better to glibbly talk about rip-offs

    It is MSE. Everything is a rip off.
    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.
  • mania112
    mania112 Posts: 1,981
    First Anniversary Combo Breaker
    Forumite
    NEST costs 0.3% pa plus 1.8% for each contribution.

    Why are the Government endorsing something that they know is too expensive?!
  • Thrugelmir
    Thrugelmir Posts: 89,546
    Name Dropper Photogenic First Anniversary First Post
    Forumite
    dunstonh wrote: »
    The only damage is if they extend it to external funds or SIPPs or whole of market personal pensions where consumer choice would be limited by this.

    Doesn't get away from the fact that fund management is highly profitable. Totally to the detriment of the consumer.
  • Atidi
    Atidi Posts: 943 Forumite
    edited 1 November 2013 at 10:34AM
    The Government says someone who saves £100 a month over a typical working lifetime of 46 years could lose almost £170,000 from their pension pot with a 1% charge and over £230,000 with a 1.5% charge.

    Did the government give any indication as to how they arrived at these enormous figures please?

    What growth rate have they assumed? Even at a generous 10% annual growth rate, assuming no fees whatsoever, and the effective 25% tax credit on pension savings, I doubt £100 per month over 46 years would grow to more than about £350k

    Do they realise this country was recently in recession, and many peoples pension pots halved in value (or even worse!) and only now after 5-6 years are they starting to recover what with BoE rates at 0.5% ... and no indication it'll be rising anytime soon.
    Of course, any increase in the BoE rate will probably, whenever it happens, now have an adverse effect on share price growth.

    Even allowing for the recovery of pension pots, have the government taken into account the very low annuity rates now available partly because of that low BoE rate?

    Or have they also assumed, as is often the way when being sold these pensions, that the customer increases their monthly payment by a similar 10% per year?
    If so, that would mean in the 46th year, the customer would be expected to be paying over £7k per month in pension payments (i.e. almost £90k for the year). Yeah, right...
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.4K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards