Fees eroding pensions

[Caliga]

I'm looking forward to that actually.   As soon as people retire, they turn into drooling old zombies who spend half the day worrying about why they're constipated, and the other half mindlessly watching Live! with Kelly.

[CountDeMoney]

I'm blowing my brains out promptly at 65.*





*Maybe 70.  I dunno.

[Caliga]

I wish more useless old people would do that.  The cost of health care would plummet in that case.

[CountDeMoney]

I wish more useless old people would do that.  The cost of health care would plummet in that case.

No shit.  And it would help traffic move faster.

[Ed Anger]

I'm looking forward to that actually.   As soon as people retire, they turn into drooling old zombies who spend half the day worrying about why they're constipated, and the other half mindlessly watching Live! with Kelly.

Constipation...check
Live with Kelly... No fucking way. I watch CNBC at 9am. 

[Richard Hakluyt]

If I start investing on my own behalf, however, don't I lose the tax break and the company matching of pension contributions?

You can protect it in a ISA if you are saving less than £11k or so a year. If the company is matching your contributions then you should stick with them of course.

don't ISAs offer horrendous returns? I use mine merely for keeping money separate to my current account; my actual investments are elsewhere, as even with tax they offer a superior return to an ISA.

You can arrange to choose your investments within an ISA envelope. Like here http://www.money.co.uk/savings-accounts/savings-account-details/Halifax/Share-Dealing-Self-Select-ISA.htm

But, I notice the charges are higher than a simple sharedealing account..............for no particular reason that I am aware of 

I'm as much a supporter of capitalism as your next selfish git, but I do believe that the system unfairly benefits the financial services industry, it seems to get the tax breaks you need to use their overpriced services.....ie the tax breaks are more of a subisidy for them than a real tax break for us.

[Warspite]

But, I notice the charges are higher than a simple sharedealing account..............for no particular reason that I am aware of 

I'm as much a supporter of capitalism as your next selfish git, but I do believe that the system unfairly benefits the financial services industry, it seems to get the tax breaks you need to use their overpriced services.....ie the tax breaks are more of a subisidy for them than a real tax break for us.

What intrigues me is that, despite supposedly hosting an advanced financial sector with lots of competing firms, rather than the fruits of competition we get opaque products, hidden fees, and a worse return than a number of our European neighbours.

[Josquius]

Clearly the best pension plan is to have a lot of kids.

[Fate]

I wish more useless old people would do that.  The cost of health care would plummet in that case.

I'd be out of a job.

[Sheilbh]

What intrigues me is that, despite supposedly hosting an advanced financial sector with lots of competing firms, rather than the fruits of competition we get opaque products, hidden fees, and a worse return than a number of our European neighbours.

I'm sure there's plenty of competition at the advanced end of the financial sector.  But in terms of consumer products I think our financial services are more oligopolistic than in the US or most continental countries.

[MadImmortalMan]

1.4% of asset value in trading fees does seem outrageous.  Are these guys flipping their entire portfolio daily?

I agree that mutual funds (which it sounds like these are) are abominations and I would never touch them except for the tax saving and the employer match.

If you choose your fund wisely, it's easy to avoid the high expense rates for mutual funds. Lots of no-load funds out there. Dinosaur pensions, you're SOL.

[Admiral Yi]

So I was puttering around on ETrade looking for overseas commissions, and noticed that in the UK any stock purchase is assessed a 0.5% stamp duty, which explains at least in part the trading fees y'all's investments funds are charging customers.

[HVC]

I'm blowing my brains out promptly at 65.*





*Maybe 70.  I dunno.

Spend your pension on 20 year old hookers. much more fullfilling

[citizen k]

I wish more useless old people would do that.  The cost of health care would plummet in that case.

I miss Obamacare's death panels. 

[Sheilbh]

The Telegraph returned to the issue today:

Fees that can halve the value of your pension
Millions of savers are being misled by City fund managers about hidden fees that can almost halve the value of their pensions, a year-long study has found.
By Robert Winnett, Political Editor
9:44PM BST 17 Jul 2012231 Comments

Nine in 10 of the country's biggest pension fund managers fail to warn people about the levies, which typically wipe more than £100,000 from the value of a middle-class worker's pension.

The report by the RSA, a think tank, found that workers were routinely denied simple, low-cost pensions that are readily available elsewhere in Europe. Ministers said they were prepared to intervene unless pension funds reduced their fees and became more transparent.

The research was published as official figures showed that 11 million people were failing to put enough money into pensions, which will leave them struggling in their retirement. Many people have abandoned pensions entirely following a decade of negligible investment returns from their savings.

The Government hopes to resolve the retirement crisis by "auto-enrolling" workers into pensions from later this year, which had led to growing concerns that millions more people could be "ripped off".

Steve Webb, the pensions minister, said: "Charges are reducing and we expect them to go down even further now that other players are entering the market. If this does not happen however we have the power to act and we will."

Ed Miliband, the Labour leader, has called for pension fees to be capped.

The RSA report found that 21 of the 23 pension funds surveyed failed to inform people about the charges.

David Pitt Watson, one of the biggest company pension fund managers and the author of the report, said the scale of the hidden levies was "extraordinary".

"For markets to work effectively, consumers need to know what they are buying," he said. "It is extraordinary that, after so many years, such a system is not in place in this country. It is vital that people have access to straightforward, accurate, high-quality information."

The report said pension charges accounted for up to 40 per cent of typical retirement savings.

Several international pension funds offer cheaper, more transparent deals elsewhere in Europe while charging British customers more. The average Dutch person can expect a pension worth 50 per cent more than their British equivalent because the country has far simpler charges.

The Daily Telegraph previously disclosed that an investor putting £50,000 into a fund providing typical returns over 25 years would lose £108,000 because of unnecessary charges.

Mr Pitt Watson said pension firms should provide their customers with simple statements setting out in "pounds and pence" how much they are losing in charges. He said small differences in the percentages levied by pension funds made a "vast difference" to people's pensions.

"These charges really matter," he said. "It's not difficult to sort out and should be addressed as a matter of urgency."
Last year, the pension industry pledged to introduce a new code of conduct setting out plans for greater transparency, but today's report undermines claims that the issue is being addressed.

Otto Thoresen, the director-general of the Association of British Insurers, said: "We agree it is desirable that pension costs become more transparent overall, and are keen to look at ideas which make it easier for employees to understand their pensions."

The issue of charges is increasingly important for millions of workers who now have to make their own pension provision. The number of people contributing to personal pensions fell by 400,000 to six million people between 2008 and 2010.

The proportion of people in a workplace pension has fallen below half for the first time in at least 15 years. Just 48 per cent of employees were in a scheme, compared with 55 per cent when records began in 1997. The number of people in the private sector with pensions linked to their final salary has fallen from almost a third of workers in 1997 to 9 per cent.

Mr Webb said: "This is a very large group of people who will face a big drop in their living standards on retirement if they do not take action now.

"And this is not just a problem for those on lower wages — those on higher incomes are just as much at risk of having a lower standard of living in retirement if they do not take this seriously.

"We have to make it easy for people to save, in confidence, knowing that they are putting enough away to have a comfortable retirement."

Joanne Segars, chief executive of the National Association of Pension Funds, said: "The private sector is going through a huge shift in its staff pensions, and even more change is on the way. The main thing is to get more people saving into some form of pension. The UK isn't putting enough away for its retirement."

Britons saving for retirement are also being hit by record low interest rates and the Bank of England's policy of printing money to stimulate the economy. This drives down annuity rates on which most pensions are based. Somebody retiring with £100,000 in July 2008 would have been able to secure an annual income of £7,855. Today, that figure is £5,743.