A new report by the Independent Project Board has criticised high charges applied to Defined Contribution pension schemes and has called for these charges to be reduced
http://www.fca.org.uk/static/documents/defined-contribution-workplace-pensions-ipb.pdf
It has estimated that over the last three years 407,000 people have joined pension schemes with charges over 1%, of which 178,000 face charges of over 2% and 22,000 face charges over 3%.
What impact do charges have on your pension pot at retirement? According to Vanguard Asset Management if you had saved for 20 years the impact of a 1% annual charge would be to reduce your pot of money by 18.2%, a 2% annual charge reduces your pot by 33.2% and a 3% annual charge reduces your pot by 45.6%. These are only hypothetical figures and do not take into account fund growth or taxation but they may make you stop and review your current pension provision to see how the charges on your pension policy are impacting on your retirement plans.
The new rules being brought into effect in April 2015 could make Pension Plans one of the most attractive means of saving for later life and so it makes sense to review your current provision to make sure it is achieving what you expected it to.
Charges are not the only factor to think about - Investment choice, product flexibility, and the suitability of the pension to your particular circumstances are some of the other factors you may wish to consider.
For a review of your pension choices or to discuss the new pension rules and how they may affect you then please contact me
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