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Saturday, September 24, 2011

Fees knock 25 percent off the value of your pension fund

New figures reveal that fees and charges can wipe a quarter off the value of a personal pension fund.

According to the latest Money Management Pension survey, charges are wiping thousands of pounds of people’s private pensions.

In the worst case it said the highest charging plan takes £21,140 out of the projected fund. This figure relates to the Skandia plan that has a 6.3pc adviser fee, plus 0.5pc trail commission paid to the adviser each year.

Someone investing £200 a month over 25 years could expect a pension worth £157,494 if the plan was fee-free. The Skandia plan would be worth just £120,050.

But Skandia wasn’t the only provider named and shamed in the survey. Axa’s with-profits personal pension would be worth just £127,853 after charges and a Legal & General plan would be worth just £122,225. The best fund with the lowest charges was B&CE – its plan would be worth £142,566.

Money Management said that it is generally accepted that high charges can be justified if performance is stellar, but if performance falls the policyholder is left with a high charging plan and charges eat invidiously into value over time. more