How can I beat high pension charges?
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What are the average administration fees for a personal pension plans? I believe my current plan is too expensive. Should I switch to another company, stay where I am or stop the pension altogether and put the money somewhere else?
chrissiet
1 year ago
Expert Financial Adviser Answer
Paul Ross DipPFS CII(MP&ER)
answered 1 year ago
Generically, then you can't do much better han a stakeholder pension. But not all give you good value for money.
The best route for you to take is to seek advice from an Independent Financial Adviser because there are several factors to take into account such as what are they charging for, your attitude to risk and fund choice and you really need advice on this. Feel free to talk to me about this and I will be able to give you some pointers about this area.
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The best route for you to take is to seek advice from an Independent Financial Adviser because there are several factors to take into account such as what are they charging for, your attitude to risk and fund choice and you really need advice on this. Feel free to talk to me about this and I will be able to give you some pointers about this area.
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
the key to this point is what are you getting for what you are paying?
there's little point opting for a stakeholder plan if you want your money managed by external fund managers - best of breed etc as their cost would be above the stakeholder threshold.
having said that, the value of your fund will also determine cost as many personal pension providers can give access to very well managed funds with costs above a stakeholder plan but with rebates in charges linked to the size of your plan, you could end up paying less than stakeholder.
stakeholder allows up to 1.5% for the first 10 years and then max 1% pa but this alone doesnt mean you are getting the best. if you want the cheapest pension, that would probably be a cash based pension as the cost would be close to zero - but then so would the return.
you need to consider what are you willing to pay but also what do you expect for it.
this isnt like comparing the price of petrol whereby you might simply choose the cheapest garage after all, its all petrol!
in volatile markets, fund managers have the capacity to outperform the market on the way down and on the way up by making selective choices as to how to invest and disinvest your money.
cheaper tracker funds dont do this, they simply mimic the market generally copying its moves exactly, on the way down and up and without the ability to vary away from this.
its a bit like pressing autopilot on your investment.
you also finally need to consider how are you going to pay for the advice you need? a good IFA will be able to earn his/her money from advising you properly but you would still come out of the relationship on top securing the majority share of the improvement to your investment.
it goes without saying that you cant get the best performance, with free advice and next to nil cost. its a bit like driving at 70mph on the motorway with your foot on the brake.
the key to successful investment after allowing for sufficient time in the market is the appropriate asset allocation - the mixture of investments that would comprise your portfolio.
feel free to get in touch if you want to chat more but do avoid disclosing too much personal data in an open forum
report abuse
there's little point opting for a stakeholder plan if you want your money managed by external fund managers - best of breed etc as their cost would be above the stakeholder threshold.
having said that, the value of your fund will also determine cost as many personal pension providers can give access to very well managed funds with costs above a stakeholder plan but with rebates in charges linked to the size of your plan, you could end up paying less than stakeholder.
stakeholder allows up to 1.5% for the first 10 years and then max 1% pa but this alone doesnt mean you are getting the best. if you want the cheapest pension, that would probably be a cash based pension as the cost would be close to zero - but then so would the return.
you need to consider what are you willing to pay but also what do you expect for it.
this isnt like comparing the price of petrol whereby you might simply choose the cheapest garage after all, its all petrol!
in volatile markets, fund managers have the capacity to outperform the market on the way down and on the way up by making selective choices as to how to invest and disinvest your money.
cheaper tracker funds dont do this, they simply mimic the market generally copying its moves exactly, on the way down and up and without the ability to vary away from this.
its a bit like pressing autopilot on your investment.
you also finally need to consider how are you going to pay for the advice you need? a good IFA will be able to earn his/her money from advising you properly but you would still come out of the relationship on top securing the majority share of the improvement to your investment.
it goes without saying that you cant get the best performance, with free advice and next to nil cost. its a bit like driving at 70mph on the motorway with your foot on the brake.
the key to successful investment after allowing for sufficient time in the market is the appropriate asset allocation - the mixture of investments that would comprise your portfolio.
feel free to get in touch if you want to chat more but do avoid disclosing too much personal data in an open forum
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
Well, three advisers here all singing from the same hymn sheet.
The cheapest pensions are those which come under the so-called 'stakeholder' banner, as well as some personal pensions which, although their rules mean that they cannot be called stakeholder pensions, have the same charging structure.
The point here is whether you want any specific advice or not. If you do not require advice, then select a stakeholder pension and make your own choices of a suitable fund - there will be fund descriptions and a guide as to the risk the provider attaches to each fund. This is certainly the cheapest route; there will be little to choose from between different providers themselves, and if you are confident and competent you can research to the funds on the internet to see how well regarded they are.
But none of us is trying to feather our own nest by saying that you could certainly benefit by taking advice, even though there is inevitably an additional cost. There is the obvious point that the financial adviser can consider the different features and quality of various pension plans on offer, can really explain the risk involved with different kinds of funds and can select quality funds with good prospects that match your own appetite for risk. The good adviser will subsequently monitor the performance of those funds and perhaps, on occasion, suggest alternatives.
Less obvious, though, is the fact that a pension is a vehicle for long-term financial planning, and should be considered alongside other such vehicles, including ISAs. And there is real danger in making long-term plans if health issues derail them, so it may be that an adviser would suggest various kinds of insurance cover to protect you and, if you have a family or dependents, them as well.
report abuse
The cheapest pensions are those which come under the so-called 'stakeholder' banner, as well as some personal pensions which, although their rules mean that they cannot be called stakeholder pensions, have the same charging structure.
The point here is whether you want any specific advice or not. If you do not require advice, then select a stakeholder pension and make your own choices of a suitable fund - there will be fund descriptions and a guide as to the risk the provider attaches to each fund. This is certainly the cheapest route; there will be little to choose from between different providers themselves, and if you are confident and competent you can research to the funds on the internet to see how well regarded they are.
But none of us is trying to feather our own nest by saying that you could certainly benefit by taking advice, even though there is inevitably an additional cost. There is the obvious point that the financial adviser can consider the different features and quality of various pension plans on offer, can really explain the risk involved with different kinds of funds and can select quality funds with good prospects that match your own appetite for risk. The good adviser will subsequently monitor the performance of those funds and perhaps, on occasion, suggest alternatives.
Less obvious, though, is the fact that a pension is a vehicle for long-term financial planning, and should be considered alongside other such vehicles, including ISAs. And there is real danger in making long-term plans if health issues derail them, so it may be that an adviser would suggest various kinds of insurance cover to protect you and, if you have a family or dependents, them as well.
