Do you think the State Pension will look after you when you retire? The answer is probably "no". So the size of your own pension pot may be important. This is the same conclusion that many of our users come to. But how can we make it bigger?
For illustration purposes only, Alex is 32 years old and has little time to monitor his finances. Hence contacting us for speedy web based advice. Simple and straight forward pensions with no frills and no hidden charges that he understands is what he wants. He wants to pay in just under £68 per month. For this the government give him tax relief of 28p for every £1 he saves making his total payment of £86.87 per month. On top of this, his employer will also pay in £130 per month. That's £216.87 per month for him paying just under £68 per month.
Fees v Commissions - Reducing Charges. Most people that save in policies have charges deducted such as annual management charges (generally between 0.5% p.a. and 1.5% p.a.), policy fees (generally between £1.50 p.m. and £5 p.m.), as well as initial charges (normally 5-6% deducted from all premiums paid) and other ancillary charges. Financial advisers commissions are normally paid from these charges. It makes good sense for people to ask about paying a fee for advice to reduce charges on their policies. In this example, by paying a fee for advice, we would be able to reinvest all the commission due back into the policy to provide a discounted, better value for money pension. In doing this, impartial advice would be recieved in the form of an in-depth report.
For a pension with all the commmission reinvested "Alex" has a Stakeholder Personal Pension with one low, simple, easy to understand annual charge of just 0.6% per annum. Don't ignore the charges on policies, they can make a massive difference to the size of your fund. Improved Pension Projections at age 65* At 5% per annum growth the pension fund could be £201,000 (£16,000 bigger than on a commission basis). At 7% per annum growth it could be £301,000 (£25,000 bigger) and at 9% per year growth it could be £459,000 (a massive £41,000 bigger). All this for a small fee of less than the cost of two months pension payments!
We can provide discounted and/or fee based advice for most pensions as well as many other types of plan that have charges such as investment bonds, ISAs, life insurance, endowments and more. For the sake of a few pounds it could save you thousands! If you would like a comparative quote for a pension on a fee basis v commission basis please complete our enquiry form .
If you want to learn more about pensions visit the Stakeholder Cafe.com or Pensions Adviser.com. Alternatively, DIY your money, you can search for a pension in the Interactive Zone . If you would like to find out more about the benefits of discounted and/or fee based advice contact us today.
*All providers are required to illustrate benefits at the same assumed growth rates and use their own charges for projections. The above illustrations were prepared by Norwich Union. Past performance is not a guide to future performance and the value of units can fall as well as rise. Charges also affect performance. The levels of and bases of, and relief from, taxation are also subject to change. If you withdraw from some investments in the early years you may not get back the full amount invested.
No advice is given, inferred or deemed to be given to any reader. If you are unsure, please seek advice on your own circumstances.