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Pension Charges - Unable to obtain a plain English reply from my provider

AsleepInYorkshire
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Pension Charges - Unable to obtain a plain English reply from my provider

#287239

Postby AsleepInYorkshire » February 27th, 2020, 7:51 pm

I've been ill for a considerable number of decades and not really been able to add funds to my pension or understand a great deal else about it. I am now correctly diagnosed and for the most am able to lead a normal life. My recovery plan is not just about my health and emotional well being but also about facing down the black hole that exists in my pension. I've 15 years to prepare for retirement.

As part of my plan I am now trying to understand the details of my existing pension. The fund value is approx £150K. In particular I thought it would be wise to ask my provider how much my charges are.

I have sent several emails to them over the last six months. I am genuinely none the wiser as to what I am paying for their services. Over the last week I've become extremely frustrated with them. I have asked them to use plain English in their responses to me. My mistake :ugeek:

The first two replies I had were

International Equity Pension Fund - 1.025%
Managed Pension Fund - 1.026%
There is a fund discount of 0.375% under this policy.


I've asked them to give me this in £'s & p. And this response is below.

******** **** deduct charges from the pension funds we offer on a daily basis at the overall fund level and not at policy specific level. The charge which is taken covers a number of different aspects including Investment costs and administration of the plan. These costs are deducted as a percentage of the overall holding and as such the monetary amount that is deducted will change as a result of the individual funds’ performance. The plan also benefits from a reduction in fees by way of additional units being added to the fund on a monthly basis.

I'd be genuinely grateful if someone could translate that into £'s please. I've considered asking them to tell me how much I paid for the year 2019 in charges. I'd assume they are obliged to let me know?

If I am paying too much for the fund to be with this company my thought process is to move to another provider.

Thanks in advance
AiYn'U

JuanDB
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#287276

Postby JuanDB » February 27th, 2020, 10:53 pm

I think this is just stating that the management fees for the funds are taken from within the fund and that you are not charged directly.

So if you hold the two funds in equal measure then you will be paying circa £770 per fund. This will be obscured in the total return figures of the two funds.

The point about fees varying is a bit of a red herring. The absolute figure will change as the fund unit value changes. The percentage will be constant.

If the reduction in fees works anything like my provider then you should see a rebate on any monthly contributions. I would suggest to check your payment history for this.

My rough guess at your fees would be 2 X £770 so £1540.

Cheers,

Juan

AsleepInYorkshire
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#288927

Postby AsleepInYorkshire » March 6th, 2020, 5:06 pm

I have asked my pension provider to inform me how much they took in fees and charges from my pension from 1st January 2019 to 31st December 2019.

I gave them five working days to respond.

They haven't.

Is there an external body that I can complain to regarding this?

Thank you

AiYn'U

AsleepInYorkshire
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#288957

Postby AsleepInYorkshire » March 6th, 2020, 8:38 pm

https://www.resolver.co.uk/

Hmm ... ;)

Will update as events unfold

AiYn'U

Alaric
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#288987

Postby Alaric » March 7th, 2020, 7:30 am

AsleepInYorkshire wrote:I have asked my pension provider to inform me how much they took in fees and charges from my pension from 1st January 2019 to 31st December 2019.


Perhaps as you already realise, it isn't a matter of simply looking up individual charges in a ledger.

These are pooled funds, so the charges are taken at the level of all investors. Apportioning these amongst the several thousand investors in the fund is by no means a straightforward task, if they even can be bothered to attempt it.

chas49
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#288992

Postby chas49 » March 7th, 2020, 8:28 am

One bit which seems unclear is whether that 1.025 or 1.026%% is before or after the 0.375% discount.

So are you charged 1.025% (ish) on £150k (~£1540) or 0.651% (~£975) ?

Alaric
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#288999

Postby Alaric » March 7th, 2020, 9:19 am

chas49 wrote:One bit which seems unclear is whether that 1.025 or 1.026%% is before or after the 0.375% discount.


I think what is happening is that every day they accrue 1.025%/365 as a charge for themselves, that periodically they cash. Also having taken with one hand, they give back with the other, so they accrue 0.375%/365 as bonus units, that they periodically add back to individual's unit totals.

Overall the effective charge would be around 0.65%, and it's that number which should be used to compare to other providers as cheap or expensive.

AsleepInYorkshire
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#289001

Postby AsleepInYorkshire » March 7th, 2020, 9:33 am

Alaric wrote:
AsleepInYorkshire wrote:I have asked my pension provider to inform me how much they took in fees and charges from my pension from 1st January 2019 to 31st December 2019.


Perhaps as you already realise, it isn't a matter of simply looking up individual charges in a ledger.

These are pooled funds, so the charges are taken at the level of all investors. Apportioning these amongst the several thousand investors in the fund is by no means a straightforward task, if they even can be bothered to attempt it.

Thank you for your reply.

Yes. I "almost" understand that.

But why can't they tell me how much they took from my fund last year between 1st January and 31st December. Which is how I would "almost" get my head around the costs.

I have to add to this though. The address they have on my "plan information" is incorrect. I've tried to change it on the "secure portal" but had no luck. Given I haven't moved address in 26 years or instructed them to change my address I asked them to change it at their end.

And they sent me a form to complete.

In summation I have no idea how much I am paying for my pension to be housed with ******** **** in and no idea what their service levels are. I have not given them my address but asked them to confirm they will change the information on my pension plan and also confirm that no information has been sent to the incorrect address they have on my electronic file.

The have continued to ask for my address so they may change it.

My concern is quite simple - if they can't get my address correct how the devil will they know what they are charging me. And that's a scary scenario.

I have informed them that I will be changing provider and raised a "pre-ombudsman" complaint through Money Saving Expert with them.

And finally I found this article which suggests that "maybe" my underlying concerns that they aren't cost effective and do not want to reveal how much I have paid as it would encourage me to think of an exit plan.

Revealed: the true cost of pension drawdown

I'm not in draw down - nowhere near. I do feel as if I may be looking at a smoking gun though.

AiYn'U

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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#289003

Postby nmdhqbc » March 7th, 2020, 9:36 am

Alaric wrote:every day they accrue 1.025%/365


I've tried to remember my maths but could be wrong. Is it not something more like... (1.01025^(1/365))-1 = 0.0027939636815244% a day.

AsleepInYorkshire
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#289005

Postby AsleepInYorkshire » March 7th, 2020, 9:42 am

nmdhqbc wrote:
Alaric wrote:every day they accrue 1.025%/365


I've tried to remember my maths but could be wrong. Is it not something more like... (1.01025^(1/365))-1 = 0.0027939636815244% a day.

Ah ha - if that's correct I suspect I could work with that

Thank you

AiYn'U

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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#289008

Postby nmdhqbc » March 7th, 2020, 10:11 am

AsleepInYorkshire wrote:
nmdhqbc wrote:
Alaric wrote:every day they accrue 1.025%/365


I've tried to remember my maths but could be wrong. Is it not something more like... (1.01025^(1/365))-1 = 0.0027939636815244% a day.

Ah ha - if that's correct I suspect I could work with that

Thank you

AiYn'U


Actually after a bit of pondering I think I'm wrong. What I gave works for daily compound interest not sure it apples to fund charges in the same way.

pochisoldi
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#289030

Postby pochisoldi » March 7th, 2020, 11:54 am

As far as I'm concerned, the percentage charge is the one I compare on, not the absolute amount.
The absolute amount you pay in actually charges is irrelevant, provided it corresponds with the percentage rate they've specified.

The only questions to be asked are
(a) "What is the annual management charge (AMC) for my pension pot?"

If the answer is "X% on top of any charges within each fund", the next question will be
(b) "What is the annual management charge (AMC) for <insert name of fund>?"

Your supplementary question (c) is something along the lines of

What effect does the AMC have on the annual rate of return?
This will usually result in statement in the style of "the management charge will have the effect of reducing a annual rate of return of 5% to 4.87%"

The answer to (a) will either be the standard rate for the "product" you are on, (look at the key features document for your pension), less any discount.
The answers to (b) and (c) will usually be found in the key features document for each of the funds.

I have never asked the question "How much am I paying in management charges?", because the answer for previous years will always be historical, and I can't do anything about it, and the answer for the future requires the use of a crystal ball, and the response will be either "We can't give you a figure because it depends on fund performance" or some made up figure based on some putative growth assumption which may or may not come true.

The only way to get an idea or "model" how much you will lose paying management charges is to compare percentages (e.g. 1% on the whole fund vs 0.95% on the whole fund), or where the charge is banded (e.g. Legal & General stakeholders) to do some maths to allow a comparison based on the size of your pot.

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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#289031

Postby Howard » March 7th, 2020, 11:56 am

I endorse your desire to understand your pension charges in simple terms.

From experience, I have found the easiest way for me to do this is to look at the value of an investment on, say, an annual basis. Rather than trying to understand the, perhaps purposely complicated, charging structure it’s worth looking at its performance over a year. If it performs better than other yardsticks you might select then you can relax, knowing that it is working for you.

If you are fairly confident you can make your own choices about investments then it’s worth considering a SIPP. You can choose a diversified range of investments and hopefully not keep changing them thus avoiding trading charges. You then are only paying an easy to understand annual charge plus the costs of any ITs, ETFs or unit trusts which you have selected.

One can then relax about the charges of funds etc. As an example, I have a large investment in Fundsmith. Terry Smith tells me his charges are reasonable. I don’t really care how much he charges as his fund has outperformed all my comparable measures.

Personally I wouldn’t worry about pursuing a large pension provider about their costs. You will never get the personal satisfaction of an “outright win”. Large financial companies will have the resources to wear you down. It is better to transfer your pension to a provider that you trust and move on. You will save a lot of time and frustration.

I am not financially qualified, so please take my comments only as the reflections of an investor who has learnt from mistakes over the years :) ! My SIPP is with AJ Bell, but there are other providers.

Good luck with your transfer.

Howard

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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#289038

Postby AsleepInYorkshire » March 7th, 2020, 12:54 pm

May I say thank you please.

I genuinely appreciate all the responses I've received and they have helped me to re-focus my thoughts beneficially.

AiYn'U

AsleepInYorkshire
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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#304908

Postby AsleepInYorkshire » May 1st, 2020, 6:52 pm

1st May 2020
Update


Bear with me ... this is a little messy.

My opening post explained how I had asked my pension provider to let me know what my charges are for my pension. I received a reply which I couldn't work with. And many have offered advice and help in the follow up posts for which I'm genuinely grateful.

At the same time I also asked them to explain why my address on the website was wrong. They sent me a form and asked me to complete the form and jump through a few more hoops so they could update the address.

Err ... I refused. And I've refused to do so on several occasions now. My rational was quite simple and I explained it to them in writing. I have never given them any address change instructions in over 27 years. Therefore, why was the address wrong and why did I need to instruct them to change it now? I also issued them with a timeline within which to respond to both my requirements and issued them with a Notice before Ombudsman referral of thirty days.

Covid 19 came along so I didn't push the Ombudsman button [yet].

Today they have written and confirmed that they did indeed get my address wrong and had sent at least one annual statement to the "wrong" address which was returned marked "gone away". No further statements were sent out. Which now explains why I haven't received any for a while now. They have now updated their records to show my correct address and apologised offering a few hundred pound as a gesture of goodwill for the distress they have caused. Noting they have not asked me to sign any "closure settlement documents". They have also informed me that their Digital and Development Teams are investigating the system error that caused the address change to take place.

They have also responded to my request to tell me how much they took from me for their services in 2019. I've received the standard response which as the thread previously states is difficult to understand. I simply do not know how much I am being charged which I find incredulous.

They must know how much they are making on my "account" in order to fulfill their profit and loss accounts for audit and taxation purposes. Or do they just take HMRC out for a five course meal twice a year? If they have managed to change my address without their own knowledge would it be reasonable to suggest they could have done it for others and should they not be reporting themselves to someone (The Police) for disclosure of information of a personal nature?

And finally if they don't have full confidence that they can manage my address and they are not imparting the amount of charges to me for 2019 is it possible that they have a "computer" issue with that too?

AiYn'U

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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#304911

Postby Alaric » May 1st, 2020, 7:00 pm

AsleepInYorkshire wrote:[b]1st May 2020
They must know how much they are making on my "account" in order to fulfill their profit and loss accounts for audit and taxation purposes.


They don't though. All they know and need to know are the aggregate of all the charges across all clients. They can probably itemise by each individual collective investment fund but that's as far as it goes.

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Re: Pension Charges - Unable to obtain a plain English reply from my provider

#304981

Postby pochisoldi » May 2nd, 2020, 8:45 am

AsleepInYorkshire wrote:Today they have written and confirmed that they did indeed get my address wrong and had sent at least one annual statement to the "wrong" address which was returned marked "gone away". No further statements were sent out.


Going off at a tangent...

A few years back, I went to log into online banking and was "locked out" - as in "You need to call us asap" locked out rather than "you've entered your details incorrectly too many times" locked out.

Turns out that one of my monthly mortgage statements had been returned "not at this address". A review of my records revealed that over the space of a week, several items of post which were expected around that time hadn't arrived. A complaint was made to the post office, and my regular postman knocked on the door to enquire/apologise. The conclusion was that a relief postman had delivered letters to the wrong address, and the divot who lived at that address wrote "gone away" and stuck them in a post box. If they had written "delivered to wrong address" or written nothing and put them in a post box, or even thrown the things away, nothing negative would have happened beyond not receiving the items, but their extra "diligence" resulted in me being locked out of my accounts,and spending time trying to persuade the bank to register a "change my address" when no such change had occurred to restore my account access, and to ensure I got access+mail again. This explains why every once in a while I get a letter addressed to "letsbe avenue" instead of the more normal "Letsbe Avenue"...


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