There is an entire industry that is no longer fit for purpose. It’s the financial advice industry. Individuals and employees are being ripped off – like pigs feeding at the trough – all fighting to get a share of the feast.
In order to explain further I’ve done some charge comparisons just so you know some truths. Importantly, it’s not only charges that have a major impact, there are a couple of other simple issues that that advice/pension industry seems to miss. More on that in separate article.
Meanwhile, in order for you to understand how much you pay in charges
I’ve done a quick comparison – just so you can see the true cost of your pension charges, you’ll note that managing pensions is not like managing property or animals – it’s a lot less labour intensive and a lot more profitable.
Money for nothing, or at least very close. It’s certainly one of the last ‘no risk businesses’ left on the planet.
UK Average Pension Fund with charges of 1.5% per year Charges £87.50 per month.
For that you could lease a Toyota Aygo over four years 10,000 miles per year.
Average Pension Freedom – drawing on pension. Based on 1.5% charges (be lucky to find that in the market place, most will be higher). Charges of £1560 per year or £130pm.
For that you could least a mid range Ford Focus on the same 10,000 miles per year.
There are also a good number of ‘half a million’ pension pots in existence. Charges on these start to become really substantial. Like the same as monthly rent on a flat in large chunks of the country. Charges on a pot this size on the same 1.5% of fund will run into £7500 per year or £650 per month.
Car wise it’s now getting interesting with a Range Rover Evoque convertible available.
Lucky enough to have a mill’ in your pension fund and the whole charges thing starts to look like your most expensive monthly bill. £1,000,000.00 pension fund, charged at 1.5% per year means you’ll be paying some £15,000 in charges alone, that means £1250 per month.
In terms of the car you could lease for that you are up in supercar league with a Porsche 911 Targa coming in at about £1250 per month.
You should be amazed and a little shocked by that, it takes no more effort or work on behalf of the provider/adviser to manage a fund of £1 or a £1,000,000.00 yet charges are 8333 times more. You couldn’t make that up.
No wonder the industry is keen to get you to invest.
Let me put some more perspective on this charge issue. The highest council tax in the UK is set via Elmbridge Council at £3128 for 2018/19 on a Band G home, there are a surprising number of people who gripe about this – but not about the costs of their pensions.
When you are ready to consider your own pension charges in detail and at a fixed cost or just want some truth around business or personal finances, you may want to get in touch.
https://www.thefinancezone.co.uk – consultancy
https://www.moneytrainers.co.uk – education
Car Leasing costs supplied by https://www.nationwidevehiclecontracts.co.uk on 11th June 2018