Does anyone know about pensions?(5 Posts)
I have three, one employer and two personal pensions, all from previous jobs. I haven't paid nearly as much into them as I should have but its a start.
My concern is that two of them haven't been reviewed - for investments/charges etc for nearly 10 years and I don't think they are performing that well. I'd like to get this get checked out but don't really know how to do it. Do I have to pay an IFA to do this and if so what is a reasonable charge (I asked someone before and was horrified by his proposed charges)?
Alternatively, can I do it myself - as I am time rich cash poor at the moment. If so, where do I start and what am I looking for? Are there any good books anyone can recommend? I'm reasonably financially literate
Your in a bit of a catch 22 here.
If you find an IFA who will review it for "free" (which you will), the only way they can make money to cover their time/effort is to recommend you transfer the plans either to a completely new plan of their choice or transfer same plan to them to manage and they will take a commission from the plan on an annual basis. Having said that here is a chance you are already paying this commission to the original adviser mind you, for no ongoing advice....
If you want a truly unbiased opinion you would probably need to pay a flat upfront fee.
If you want to have a go at doing it yourself you can look at trustnet.com which gives info on all pension funds in the uk. Importantly you should compare the performance of your funds with the "sector average" which tells you how similar funds are doing. This is really the only way to compare performance.
CHarges are more difficult to assess. It's likely you will be paying anything between 0.6% and 2% per annum depending on your funds. But it's worth paying a higher charge if you are getting really good performance so a higher charge isn't a disaster if the fund is doing well IYSWIM
I'd start by approaching the pension companies and asking them to provide you with a note of the charges you are paying and the investment performance of your funds. Also ask them for a list of other funds which are available to you so you can compare investment performance.
Its hard to choose your own funds, its not just about performance, you need to be sure the fund isnt taking more risk than you'd like too. Watch out for "Lifestyling Funds" which automatically reduce the risk you are taking as you get closer to retirement
Thanks for all that. I've done some of the above (apparently I'm not paying any commissions any more so that is one thing) - but I'll definitely check out trustnet.
Be very careful on pension transfers as you end up paying huge amounts of commission. Possibly 10% of the pension pot plus 1% a year thereafter. This will have a huge impact on your final pension. www.Which.co.uk did a good report on this a few years back (you might find it on their website). I also wrote an article on this, I dare not put the link in as I don't want to be seen as advertising.
There can be benefits too in tidying up your arrangements. Just make sure you get good advice and discover exactly what you will be paying for.
A final word of warning. The commissions paid to IFAs end in 2013, but not for products sold before then - so they are in a big hurry to get you signed up now!
You may well be (almost certainly are) paying a trail commission, it doesn't show on any statements as it's taken out of the management fee.
Switching is not as expensive in all cases as HB states as any commission can be limited if a fee agreement is made (plus commissions are often taken out of standard charging structures).
Also if you're invested in poor underperforming funds a fee would be worth paying as the opportunity cost is often greater.
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