Pensions, charges,...

22 Aug 2006
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I heard Paul Lewis on R4 Moneybox complaining that too many people don't know if their pension provider is charging them too much in the annual charge, to hold their pension. I got a little bit cross.
Sure, as he said, if they're charging you 1% where you could get someone else charging you 0.3%, you're wasting £7,000 p.a. (on a £1m pot), and over time that's a lot. He actually said £70,000, but if your pension runs say 35 years - that's a quarter million which would take you maybe a year or ten to earn...

A friend of my wife heard it too, and got worried. Thinking I might know something about pensions because of my stock market dalliances she called me. Sigh. I don't, much. I wanted her to "not take much of my time" , so I asked her how much money she's got, where, and invested in what. Unfortunately she had all the answers. About 400k, through Hargreaves Lansdown, with Prudential, in a fund whose name I've forgotten.. Most of the funds have names like Special SItuations Opportunities Emerging Markets Consolidated Hedged Gofaster Wisdom Advantaged.
Yes she also had the figures for the last 5 years.
Hargreaves L charge 0.45% afaik (because I have a tiny SIPP stuck with them). That's not the lowest by a long way but - pros and cons... So it's costing her £1800 p.a.

Big question, How much has it grown in the last 5 years. Oh, 5.2%, she said. Per year? No, over the 5 years. Bloody hell.

Truth is, a lot of pensions go backwards for short or long periods. Hers is up a tiny bit this year, 1.8% I think. It's disgusting KEEP TRACK OF YOURS.

FInd out what it's called and google it with the words "fund screener". Hopefully you'll get a hit where you can compare it with others.
Just as an example, from Hargreaves Lansdown's. HL are just a "holder" - of which there are many. Vanguard , AJBell, etc etc, with different setups. These days the annual fees can be little or nearly zero, so shop around - "consult an IFA". But look at the rates of GROWTH:
(Google ETF SCREENER or FUND SCREENER to give you a wide view).

WIth these few, an initial £1000 would have become between £600 and £2500.

For clarirty - The FTSE100 would have been negligible and sometimes negative, the cash account , which is yellow and hard to see, (there are many, money marlet, etc) would have been almost flat, but positive. The Index Linked one is a joke. Like MANY, you'd have less than when you started.

Most have done better at some times than others. Since 1st Jan this year, my H & L SIPP is up something like 15%, in Jupiter India and a Technology fund. (Some was in Japan).
Make sure that if you're in any fund which can go backwards, you can swap it to Money Market, or something FLAT so you don't suffer the loss.
Ideally of course, review it every month or so , so you can change the mix.

A few notes:
Some funds are marked Dist(ribution) which means they pay dividends - which can be very little. Acc(umulation) versions put the divs back into the fund.
YTD means Year to Date, ie since Jan 1st this year.
If you want, you can put some types of pensions into shares, bonds, whatever you like. Not all - you'll have to ask.
It will usually take you a few days to move a pension fund but you shouldn't lose value. Some banks etc will charge a fee say £30 for that, HL for example is free.
You can't invest through a provider directly into an Index as such, but there will be a Fund which mirrors it.

The S & P 500 is a fair choice if you want zero thought, because it's the most successful 500 US companies. Weaker ones drop out and get replaced, over time.
There are funds like S & P x2 or x3, if you're feeling brave.
Dividend-biased funds can give you an income AND grow, but you need to be really on top of those.
Mutual finds - google those.

I day-trade at the moment. It's quick, you can be in and out of a stock, or fund, several times a day. 10% a day is ordinary, depending. Obviously that's impractical for anyone with a life. But if you had a few funds, and you looked at them and drew the charts (plenty of free services do that for you) say every couple of weeks, you could have turned that £1000 into a multiple of that in 5 years , quite reasonaby. EG after COVID (April '20), the Healthcare sector took off for a while - no surprise. Trends last long enough that you can ride a wave. DON'T jump in, take advice, watch and read and learn for a while first.

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A quick scan around says that Invest Engine then Interactive Investor then Vanguard are the cheapest for fees, as platforms to invest in. "ii" currently gives you cash to open an account. IE is "up to £50" if you find a link to use. Int Inv have a flat fee for holding the account , which may invoke a negative response from you, but the traditional investment platforms, as above, have percentage fees much higher. (Highest I've seen is 0.95%) Flat fees are therefore much better if you have more cash invested. Note you get platform fees and then individual Fund Fees - which can be much higher, up to say 0.8%
Many of the platforms will hold your money whether it's a pension (as a "SIPP" or an ISA or just an investment - check.
Freetrade does all - but there are fees...
Hargeaves Landsdown's is easy and they have a lot of info and you can call them and they speak English, but their fees are high compared with ii and many others

A fee-free Trading platform (not for pensions afaik) like Trading212 or eToro or others are just that; free to open, invest, or trade. But they may not hold the better funds, or may charge you more in the "Spread " ( buy / sell prices). EToro is popular, they say, but I've found it to be impenetrable - too many things don't work properly, and they do not have an effective Help facility, and their fund choice is crap.
Trading 212 is not for pensions though they have an ISA platform, which appears to be free. Nothing there like "Jupiter India" though they have a number of funds (half a dozen for "India") from major ETF providers like iShare. They have a help Bot which usually gets things right, but check.

A major bank I use is a behemoth. Charges are medium (ie quite high , these days). I also found when transferring a six figure sum from one fund to another, the sum wasn't visible on their platform AT ALL for a few days. I expected better.
Invest Engine probably holds the fund you want, but I find them hard to dig out from their unordered list.

I found that we have 3 small pensions to put together in one pot, and I think it'll be Interactive Investors, mybe IE as well.
One we hold is with Reassure, which is the leader of the "Complained about" holders. I expect they will charge like a rhino to remove the funds. gives an overview of funds they ii have doing best.

The easiest I know of so far for holding a sum up to the FSCA safety guarantee limit of £85k, free, is Trading 212, where you can have an ISA, a plain investment, or a leveraged investment you can trade daily. You could for example put some dosh in "3x Nvidia" which has grown 1500% recently.
Or S&P 500 3x, which is up 14% just this month, or 3x Semiconductors, or....

If you don't have any pension and have stopped earning and just have a bit saved, there IS something you can do:
You can put an amount into a pension , up to age 75 (I think it's 75),
Why would you?
As it's a pension, the govenment add to it the tax you would have paid to earn it.
The max you can pay each year (it would be into a Self Invested Personal Pension (SIPP) is £2880, which instantly becomes £3660.
After a year you can if you want withdraw it. If you withdraw it all, and you were paying tax on it all at the low rate you'd get £2928 - £48 profit. If you don't pay tax because you don't earn enough, then you'd get £3660. Wahoo!. Plus the profits from whatever fund you put it in. I've been banging on about say the S&P500, which gained about 20%, which would be about £4000, so not a bad return on 2880.
S & P 500 Information Technology fund - pretty safe, would have given you £5k, a 70% return.

DO note that the S&P 500 may not do as well as that this year, and that the current state pension will soon be hitting the tax threshold of 20%.
It's a lot better than 5% in a building society, though.
At the moment, the markets are likely to jitter a bit. Learn before you leap.

E & OE and all that,
This is not financial advice. You can call the gov free advisor at PensionWise. There's a lot of free advice online , eg at the Telegraph, Forbes, Moneysupermarket etc.

If you have any questions I may have come across an answer...
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When you are paying in there is not much you can do about the charges and unless you are of the age where you can take the capital, your only choice is to consolidate in the a lower cost provider. But only if the lower cost provide can perform. If the more expensive guy delivers a better return, it may be worth it.

You also have the ability (at the moment) to stuff spare cash in to you pension and get a tax benefit. Labour have said they will close this, so I wouldn't go mad.
When you are paying in there is not much you can do about the charges
It doesn't apply to me obvs, but unless you're young and tied to a company scheme or summat (we are, partly) you can always transfer to another holder, can't you?
I found above that even a cheap provider (Interactive Inv) has the same funds to invest in. This is where I came in - check what the money is actually returning. It's an order of magnitude more important than the fees.

You mean Labour will bring the million (ish) limit back? If the pension co is going to use Consolidated Mutual Balanced Fund at 2.3% the you quickly become better off without the initial uplift.

Oddly enough Gordon Brown was the last one to stuff the pension system, though Lizzy had a go.
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It's also why ETFs are so great for those who don't have time or skill. You can easily replicate a fund for a fraction of the cost.. but Ideally you want this in a ISA, which I know iii do
I’ve got 2 funds. The one with the higher charges has consistently out performed the cheaper costs fund.

Be careful what you wish for.

The issue is that far too many people simply don’t understand pensions or their charges