Fees and charges
Often not explained properly or understood!
Overall not the biggest issue I see. Mostly 1.2% for 8 years or 1% for 10 yeats is the maximum you will see or find. In comparison vs the UK where charges are normally 1% for life.
Thus charges stopping after 8 years, will work out cheaper in the long term if in the likely situation that you hold the pension for 20 years.
1.2% for 8 years = 9.6%
1% for 20 years+ = 20%+
Sadly, there can be many hidden fees added to the above AMC that will eat into your returns. Always get a second opinion before you enact a pension transfer or even after. matthew@regency-wealth.com
The charges are based on the initial investment. Say 1.2% of £100,000 =£1,200 per annum taken quarterly in arrears so £300 per quarter shown on most statements. This charge is static no matter the value after performance is factored in. For ease of math if the policy doubled and your new future valuation had a net value of £200,000 your 1.2% annual management charge (AMC) was static at £1,200 but now only equates to 0.6% p/a of the current policy value. Good news for positive performance but the reverse equally true. £100,000 drops to £50,000 yet charges remain set at the original investment amount equating to an AMC of £1,200.
The charges shown above are variable and can be set by the advisor. I.e. the larger the amount you have the lower the charges can go once the advisor faces competition. I.e if an advisor knows he has no competition he will go for maximum. If he knows there is competition he may offer to reduce his commissions. This can make a huge difference to the costs involved. Ever penny saved is a penny you can spend and enjoy in retirement. With such large sums involved with pensions pennies is normally thousands of pounds!
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