Consumers advised to be aware of pension charges
20 May 2003
Consumers could be missing out on savings by failing to consolidate their pension pots, according to Legal & General.
The financial services supplier advises customers that they are often better off placing their pension with one provider to get the best deal on charges.
Legal & General warns that a number of 'older style' personal pensions are still administered by pension providers who charge customers at pre-stakeholder levels.
However, Legal & General also explains that even where pension providers are giving existing customers the benefit of an equivalent stakeholder charge, this charge is likely to be set at a single level charge of one per cent per annum.
Andy Agar, Legal & General's Director Pensions Marketing warned, 'While this 1 per cent per annum level charge limit represents excellent value for money in the earlier years of a client's pension plan when compared to 'old world' charges, it will start to bite heavily into a client's fund in the later years as it grows.'
For example, someone with an accumulated pension fund of £15,000, contributing £250 per month for a further 25 years, could save £10,000 in pension charges by moving to a 'tiered' single charge product.
Legal & General points out that the FSA's research paper 'To switch or not to switch' concluded that consumers who took out an individual pension with above-average charges that have not subsequently been reduced could potentially benefit from switching to a pension with charges at stakeholder levels.
Andy Agar continued, 'Charges are particularly relevant at the moment, as pension customers are now starting to receive benefit statements which take inflation into account on their projected pensions. Also, many are likely to be considering whether they should contract back into the State Second Pension. In both cases, this is an ideal time to take the opportunity of reviewing their current level of pension charges.'
Consumers are advised to talk to their financial adviser, who can assess whether or not a transfer of their benefits would be worthwhile as it is not always beneficial in every case.