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  • FIRST POST
    • spup
    • By spup 13th Feb 18, 9:45 AM
    • 3Posts
    • 1Thanks
    spup
    Management Charge
    • #1
    • 13th Feb 18, 9:45 AM
    Management Charge 13th Feb 18 at 9:45 AM
    I have a pension from a previous employer that's currently sitting at so may thousand units. I no longer make any contributions to this pension.


    Every year, there is a management charge where they deduct a few hundred units off my total and my total units diminishes a little.


    If this carries on for the next 15 years or so until I retire, my 'pot' is going to be a lot smaller!


    Is there anything I can do to reduce or stop this charge (merge with my current etc -I know I'll pay a management fee there but at least my pot will be growing not shrinking!).


    Many thanks!
Page 1
    • Thrugelmir
    • By Thrugelmir 13th Feb 18, 10:11 AM
    • 58,203 Posts
    • 51,575 Thanks
    Thrugelmir
    • #2
    • 13th Feb 18, 10:11 AM
    • #2
    • 13th Feb 18, 10:11 AM
    Every year, there is a management charge where they deduct a few hundred units off my total and my total units diminishes a little.


    If this carries on for the next 15 years or so until I retire, my 'pot' is going to be a lot smaller!

    Originally posted by spup
    What matters is the value of each unit not the number you hold.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • seacaitch
    • By seacaitch 13th Feb 18, 11:19 AM
    • 74 Posts
    • 137 Thanks
    seacaitch
    • #3
    • 13th Feb 18, 11:19 AM
    • #3
    • 13th Feb 18, 11:19 AM
    Pension funds commonly apply charges via a deduction of units - as opposed to other types of funds that commonly apply charges by reducing the value of each unit.

    The deduction of units method makes the application of charges more noticeable, particularly if further contributions are no longer being made, prompting reactions like the OP's, concerned that there'll be few units left by retirement age...

    Whether charges are applied via deduction of units or by reducing the value of units, all that's really relevant is the size of those charges - the method of application is irrelevant.

    So the questions to be asked are:

    (i) What are the charges like on that old employer defined contribution (DC) pot, and how do they compare to the charges ON THE BEST ALTERNATIVE OPTIONS, ie. don't necessarily compare them to your other pension pot, but compare them to the whole market, in case your other pot is poor value.

    (ii) How is that old DC pot invested? Is the investment strategy it follows and its asset allocation suitable for your risk profile and the job you're asking it to do, ie. how it fits into your overall retirement investment plan. And performance-wise, is it delivering the goods?

    Figure these things out, and the decision as to whether to move this old DC pot elsewhere will become clearer.
    • dunstonh
    • By dunstonh 13th Feb 18, 11:41 AM
    • 92,189 Posts
    • 59,353 Thanks
    dunstonh
    • #4
    • 13th Feb 18, 11:41 AM
    • #4
    • 13th Feb 18, 11:41 AM
    If this carries on for the next 15 years or so until I retire, my 'pot' is going to be a lot smaller!
    No it wont.

    Unit count multiplied by price is what matters. The unit count may fall graduallly but the unit price goes up. The other way of pricing is to pay the charge within the unit price. You dont see it as explictly but it has an identical outcome. A bit like 3x4 gives the same answer as 4x3.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • wiltshiregirl69
    • By wiltshiregirl69 14th Feb 18, 6:57 PM
    • 32 Posts
    • 15 Thanks
    wiltshiregirl69
    • #5
    • 14th Feb 18, 6:57 PM
    • #5
    • 14th Feb 18, 6:57 PM
    'IF' the unit price goes up by more than the charges...
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