Hidden Charges in Personal Pensions Can Eat into Premiums, Warns Actuary

Many people investing in personal pensions are unaware of hidden charges that can significantly reduce their retirement savings, according to a new survey by actuarial firm Bacon & Woodrow. These charges, which include stockbrokers' commission, trusteeship fees, custody fees, and stamp duty, are often not included in the annual management fees and can add up to 0.5 per cent extra. Despite identifying these charges, the firm did not deduct them from their list of best-buy unit-linked pensions, highlighting the complexity of the issue.

Key Takeaways:

• Hidden charges in personal pensions can add up to 0.5 per cent extra to premiums, according to Bacon & Woodrow's annual survey.
• Charges such as stockbrokers' commission, trusteeship fees, custody fees, and stamp duty are often not included in annual management fees.
• The firm did not deduct charges from their list of best-buy unit-linked pensions, despite identifying them.
• The most expensive pension policies over 40 years were provided by Gartmore, which deducted 30.2 per cent of premiums.
• Gartmore was also one of the most expensive options for larger single premium policies, regular premium contracts, and investment of a transfer value.
• The survey, which includes a guide to personal pensions, costs £27.50.

Statistics:

• Hidden charges can add up to 0.5 per cent extra to premiums.
• Gartmore deducted 30.2 per cent of premiums over 40 years.
• The most expensive policy over 20 years was provided by Lincoln National.
• The cheapest policy over 5 years was provided by Britannia Life.
• Gartmore was also the most expensive option for regular premium contracts, investment of a transfer value, and rebate-only plans.

Sources:

• Bacon & Woodrow's Guide to Personal Pensions.
• Telephone: 0727 855566.