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Uk Companies Selling Pensions Take 80 Percent In Fees And Commissions

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RIPOFF

Research carried out by the BBC has revealed that some pension-selling companies take as much as 80 percent in fees and commission from some of their private pension plans. The rip-off involves not merely rogue operators or a few isolated cases, but well known high street names such as HSBC, Legal and General, and the Co-Op.

None of the companies concerned disputed the BBC’s findings.

Concerns have been raised for some time about the high level of fees being charged by private pension providers.

The BBC examined the pension plans sold by the main providers, using data provided by the companies themselves and the Consumer Finance Education Body (CFEB). Of the 24 providers, 21 volunteered the information to the CFEB and confirmed it as accurate.

According to Panorama, the BBC’s flagship investigative programme, the fees and commission accruing on one HSBC pension plan, where someone pays in £200 a month, would amount to £99,900, or 80 percent of the £120,000 money paid in over 40 years.

HSBC admitted that it makes a 20 percent profit margin on such a pension, but claimed that the pension was “good value for money”, “competitive” with other similar pension plans and was “certainly not one of the most expensive pension schemes on the market”.

In that case, all the other pension providers are also ripping off their customers.

The Co-Op, a mutual insurance society with no shareholders to satisfy, would take nearly £96,000 in fees over 40 years on deposits worth £120,000 in its Individual Personal Pension. The Co-Op claimed that it had higher costs because it used external fund managers to administer the pension plan.

It said, “Our pension charges are fully transparent, and include not only investment costs, but also administration expenses and financial advice provided.”

“The vast majority of our customers’ pension invest in funds with funds lower than or equal to the ‘stakeholder’ government-set levels,” it continued. What the Co-Op did not say was that “stakeholder” pensions are notorious for their high charges and are widely acknowledged to be poor value for money.

The Legal and General would take about £61,000 on its Co-funds Portfolio Pension.

According to pension consultant Malcolm McLean, each time the pension is sold on, the annual percentage charge, which seems small, grows in real terms each year as the fund grows and each new management firm takes its cut. Customers have to bear the cost of management fees, an annual fund management charge, establishment fees, dealing fees and brokers’ bonuses.

The high fees come at the expense of customers’ future pensions. According to Dr Paul Woolley, who used to run a multi-billion pound investment fund and established the Centre for Capital Market Dysfunctionality at the London School of Economics, fees and commissions have doubled over the last 10 years to reach 1.5 percent. He said, “The net return to pension funds collectively has reduced. And it is reduced by the amount that the fees have gone up.”

The BBC’s investigation makes it clear that working people have once again been sold a pup. These pension plans are almost worthless. The City of London is thoroughly deserving of its reputation as a bunch of swindlers, cheats and parasites, preying upon hard working families.

While successive governments claimed to have cleaned up the pensions industry after the pensions mis-selling scandal of the 1980s, the Maxwell pension scandal in the early 1990s, and the collapse of the insurance company, Equitable Life, it is business as usual.

Just 18 million workers have an occupational pension. Many employers have closed their schemes to new members. The state pension provision, upon which more than half of pensioners rely, is derisory. It is equal to only 15 percent of average male earnings.

Millions have been forced to make their own provision for their retirement by buying a personal pension plan, whose funds are invested in the stock market. And that is the preferred solution to the “pensions crisis” of all the parties. The Labour government introduced a new scheme, to start in 2012, that will force workers to save for their retirement in stock market-based pension funds. With almost nothing coming from such pension investments, they will still find themselves dependent upon the meagre state pension they sought to augment.

More than a third of pensioners live in poverty and this figure will rise.

According to research from Lincoln Financial Group, 41 percent of workers in the UK doubt whether they will have enough to live on once they reach pensionable age. More than a third of people expect to work full or part time during their retirement to avoid poverty. Older workers are even more worried. Of those aged 55 or more, one in 10 already plan to work full time during retirement and 47 percent say they will work part time. Some doubt whether they will ever be able to retire. More than 1.2 million men and women over retirement age are working today. Traditional retirement is already a thing of the past.

A social catastrophe and untold distress faces millions of pensioners and those soon to become pensioners, as the mechanisms to evade that fate have fallen apart.

As occupational pensions in the private sector, personal pensions and the value of savings have been eroded with the onset of the financial crisis, Britain’s bosses, the media and political parties have mounted a deafening campaign against the occupational pensions for civil servants, teachers, police and National Health Service and local authority workers, claiming that they are unaffordable.

The Conservative-Liberal Democrat government brought in Lord Hutton, a former Secretary of State for Work and Pensions in the Labour government, to review public sector pensions. Hutton’s first report, published last week, claims that the cost is simply unsustainable, even though he acknowledges that the average pension is just £7,800 a year and the cost has fallen as employees’ contributions have risen. He has indicated that higher contributions, postponement of the retirement age, and a switch from final salary to average career salary are all under consideration.

Tick, tick, tick....

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Guest UK Debt Slave

RIPOFF

Tick, tick, tick....

I resolved this problem for myself

I refuse to pay into a pension and haven't done for quite a few years

What's the point? You'll never see that money again

You're better off investing the money yourself

The pension business is a scam and has been for a longtime. I remember a pension salesman trying to sell me a pension 20 years ago and he was telling me I would retire with some huge sum of money. I didn't believe it then and I don't believe it now.

Pensions are a mugs game. Hang on to your money and invest it yourself.

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I resolved this problem for myself

I refuse to pay into a pension and haven't done for quite a few years

What's the point? You'll never see that money again

You're better off investing the money yourself

The pension business is a scam and has been for a longtime. I remember a pension salesman trying to sell me a pension 20 years ago and he was telling me I would retire with some huge sum of money. I didn't believe it then and I don't believe it now.

Pensions are a mugs game. Hang on to your money and invest it yourself.

Are you self-employed? If not, you may well be automatically enrolled into a pension scheme (NEST) soon. Under the present rules you can opt out, but how long will that be possible for

Like you, I detest the idea of this creeping compulsion to "save" in "their" schemes. It's nothing more than an increased NI contribution wrapped up in warm cuddly language, i.e. more tax. At the same time, the BoE openly admits that it is deliberately penalising savers, to make them spend more. Mixed messages or what?

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Pension funds are a huge waste of time unless you are a higher rate tax payer and/or in control of your own pension fund (rich again). Expecting a compound return up until retirement of 7% after deducting 1.5%< management fees is just never going to happen and when the retiree finally kicks off the work boots and purchases their annuity it is effectively an insurance policy that pays out a paltry rate until your dead and your money just gets swallowed up in the machine so no legacy. The only pension fund I have is one when I worked in banking for five years of my life - my last payment into the pot was in year 2000 and was valued at just under £20k and todays total value is ballpark £1,850 so i've learnt my lesson in pension funds and will never never make the same mistake again.

Compare 100k pension pot purchasing a generous annuity of £4k per annum from age 65 to...

Just saving a 100K in the building society instead and earning 5% per annum (i'm guessing interest rates may eventually reflect common sense) from age 64 and then taking £7k on the anniversary every year afterwards for 15 years. If all goes as planned at this point (80 years old) there will still be £50,000 in the bank. All my grandfathers and greats have all been pretty much life extinct in their sixties and not one has lived past 74 so my bets are hedged against this. I am being a realist and not being wooed by pension porn .

If I get down to my last £25k by this time i'll be 85 years old so i'll book a year long round the world air ticket (hate cruises) and try damned hard to make my last leg home in a wooden box. coke, orgies (viagra) etc etc you get the idea.

Disclaimer : I don't do drugs and would not recommend them as they may cause physical harm to a young and healthy body.

:D

As there are so many heavily indebted people in this country I think that the goverment of the day should allow a one time withdrawal of 25% of what ever is in their pension fund to go against the mortgage regardless of age on the condition that the remainding 75% has to go against an annuity and any contributions made after this date would still be eligible.

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If you want to self invest and cut out all the fat commission fees, then you might be interested in Hargreaves Lansdown

http://www.h-l.co.uk/

I find them helpful, upfront & above all a very cost effective way of investing

I have a SIPP with H-L as well. I don't think their web-based trading platform is up to much, and it's annoying getting logged out every 10 mins. Consequently, I use Refresher, the automatically refreshing browser to stop that nonsense. You can't do stop-losses, short a stock or calls or puts (not that I yet really know how those work), but you can invest in ETFs, funds and individual stocks.

I took my money out of one personal pension and put it into this SIPP in May. Since then, I've already made up more than the redemption penalty and that's on profit taking, not just stock value.

I've got another personal pension with Scottish Equitable (Aegon) and I've realised that they are charging me 20% of my contributions per month! I've put in a complaint letter and they are saying that everything's OK, we're being open and transparent about the charges, blah blah. In that case, why don't you list the charges on the annual statement, along with the contributions? T0ss3rs. So that pension will be going in my SIPP as well.

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:D

As there are so many heavily indebted people in this country I think that the goverment of the day should allow a one time withdrawal of 25% of what ever is in their pension fund to go against the mortgage regardless of age on the condition that the remainding 75% has to go against an annuity and any contributions made after this date would still be eligible.

Great Idear

I beleive that something like this has/is being considered.

They are also looking at the whole auunity situation. That is the biggest con of the lot right now. Why should you be forced to buy one of these with your money and then only receive the interest that that earns the rest being taken when you die. There are far better ways that the money could be invested and it should be the person's choice .

I am one of the lucky ones I paid into a blue chip scheme for 17 years , when made redundant our pensions were topped up by 40% and the current figures look good.

However the company that now looks after the pensions for us has to be kept a close eye on. They made a big mistake when my pot was transfered to them. I pointed this out and it was corrected , four years later I notice by going back through past statements that things were still not correct. When I contacted them they denied that anything was amiss, it took a while for them to eventually agree that the amount in my pot was wrong and then put that right.

Not boasting but I had learnt to read the statments correctly as they are quite complicated , I wonder how many other mistakes have been made in their favour and not picked up by the owners of the pension pots.

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Pension funds are a huge waste of time unless you are a higher rate tax payer and/or in control of your own pension fund (rich again). Expecting a compound return up until retirement of 7% after deducting 1.5%< management fees is just never going to happen and when the retiree finally kicks off the work boots and purchases their annuity it is effectively an insurance policy that pays out a paltry rate until your dead and your money just gets swallowed up in the machine so no legacy. The only pension fund I have is one when I worked in banking for five years of my life - my last payment into the pot was in year 2000 and was valued at just under £20k and todays total value is ballpark £1,850 so i've learnt my lesson in pension funds and will never never make the same mistake again.

Compare 100k pension pot purchasing a generous annuity of £4k per annum from age 65 to...

Just saving a 100K in the building society instead and earning 5% per annum (i'm guessing interest rates may eventually reflect common sense) from age 64 and then taking £7k on the anniversary every year afterwards for 15 years. If all goes as planned at this point (80 years old) there will still be £50,000 in the bank. All my grandfathers and greats have all been pretty much life extinct in their sixties and not one has lived past 74 so my bets are hedged against this. I am being a realist and not being wooed by pension porn .

If I get down to my last £25k by this time i'll be 85 years old so i'll book a year long round the world air ticket (hate cruises) and try damned hard to make my last leg home in a wooden box. coke, orgies (viagra) etc etc you get the idea.

Disclaimer : I don't do drugs and would not recommend them as they may cause physical harm to a young and healthy body.

:D

As there are so many heavily indebted people in this country I think that the goverment of the day should allow a one time withdrawal of 25% of what ever is in their pension fund to go against the mortgage regardless of age on the condition that the remainding 75% has to go against an annuity and any contributions made after this date would still be eligible.

Great Post...........................On that note listen to this one...

I was talking to a gent the other night in the pub, he was in his late sixties, anyway he has a son, no kids, he is single, no partner, anyway he inherited after inheritance tax circa £500k, after selling the property. He is 42 years old, might be gay i think, never had a girlfried, but no matter anyway. He has worked out that starting on his 42nd birthday he can withdraw £416.00 per week for the first year, then this sum (£416.00) rising in line with the after 20% tax yield, so the net return on his savings, every year until he is 66 when all the £500k is gone. So if in the second year he gets 2.5% after tax return on his remaining balance, he will give himself a 2.5% pay rise for that single yaer and so on. When he hits 66, if he is still alive, who cares, he has had 24 years of living a pretty good life travelling, enjoying, he might get a part time job to supplement his state allowance......................Not bad hey, like is short?

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Back in the Eighties smarter people were waking up to the fact that pensions are a rip off. The pensions industry is in a large part responsible for the huge number of people who went into BTL as a consequence. Thus for HPI.

Pensions salesmen made 'projections' of future returns that they knew full well were simply guesses, and knew that the salesman certainly wouldn't be around 25 years later to be confronted by the client. Salesmen traded on the naivety and financial ignorance of clients. People made the fatal mistake of trusting them.

Nothing has been done in thirty years to clean up this industry.

Saving into cash ISAs would probably give a better return over the long term, with no risk and leaving the saver in full control of the capital sum saved.

Edited by juvenal

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The Co-Op, a mutual insurance society with no shareholders to satisfy, would take nearly £96,000 in fees over 40 years on deposits worth £120,000 in its Individual Personal Pension. The Co-Op claimed that it had higher costs because it used external fund managers to administer the pension plan.

...the Banking and Insurance merged recently ....do they not call themselves 'the ethical' financial services group ...?... :lol:

Edited by South Lorne

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I don't know. My employer matches my contributions up to 4.5% so if I'm putting in £100 and they add another £100 to it, I don't see that as being too bad a deal? I only put in the minimum, though, admittedly. I'm also relying on share investments to hopefully build over time. I can't believe I used to have a cash ISA - piss poor rates. S&S ISA the only way to go.

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  • 145 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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