Recent figures released by Money Management indicated that personal pension plans could be reduced by as much as 25% over the life of the fund due to the high cost of fees and other charges. Statistically, longer term plans lose more money than those of a shorter duration.
According to the report, a pensioner investing £200 monthly for a period of 25 years could expect the pension to be worth approximately £157,494 if there were no charges or fees associated with it. However, the report singles out Skandia with traditionally high charges. At the end of the 25 year period, with the pensioner investing that amount of money, the amount coming to them would be reduced to £120,050.
Other pension plans were mentioned in the report, including Axa, Legal & General and B&CE. When calculated based on the fees and charges of each of those pensions, the same type of pension would be worth £127,853, £122,225 and £142,566 respectively. The best plan is obviously B&CE which was pointed out by Money Management in this, the latest of their pension surveys.
Whilst the high cost of many pension plans can be justified if they perform well, those high fees can significantly reduce the net value of a pension if performance is lacking. Over the course of 25 or more years, this drastically eats into the pension fund which leaves the pensioner little to show for his or her lifetime investment.
Oddly, the results of this survey were made public only days prior to Legal & General notifying their pensioners (more than 100,000 of them) that as of next year fees would be increased. As this pension was also noted as being one of the costliest of personal pension plans, this news was not taken lightly. Fees associated with this pension plan could run as high as 1.5% or higher.
