News Archive - August 2011
The myth of management charges
17/08/2011
There has been more recent press comment on investment management charges, specifically on pensions, and how they can reduce the value of your pension pot.
Firstly, I do always advise my clients on their existing pensions with a view to reducing the ongoing charges. Older-style policies can often have higher annual charges than a modern pension contract. A transfer is often possible, and if this benefits the client then I will recommend it.
However, the hysterical press comments about pension charges tend to overlook one fact. The charges on a policy are actually paid in exchange for a service. The pension company administer your pension policy for you, and the fund managers select investments for you. In exchange for this service, they need to be paid.
I don’t see the point in saying that a person’s pension pot would be 30% bigger at maturity if there were no charges on it. This is the same as complaining how much lower the cost of a mortgage would be if the banks did not charge any interest.
All charges on a pension are stated on the Key Features illustration which you are given when you take it out.
Sadly, there is never any positive press comment on pensions. This would not be a problem if people chose to save in other ways for their retirement. In reality, they often choose to do nothing.
If you want to take some positive action to plan for retirement, please call Mulberry Financial for a free meeting.
The material here is for general information only and is not intended to be relied upon for individual investment decisions. Appropriate independent advice should be obtained before making any such decisions. Mulberry Financial Ltd does not accept any liability for any loss suffered by any user as a result of any such decision.
The information is based on our understanding of current HMRC rules and practices (as at the news article date) which are always subject to change. Taxation and trust advice and Cash ISAs are not regulated by the Financial Conduct Authority. This site is aimed at UK residents only.
Please remember that the prices of shares and other investments can fall sharply. You may not get back the money you originally invested. Past performance is not necessarily a guide to the future.
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