Take the direct route for your pension plans

Buying a pension direct has made things easier, but be sure you know what you're getting.

NOT SO long ago, buying a personal pension seemed so complicated that we needed an adviser to get it right. But since the mid-Nineties, telephone-based providers have entered the fray.

Part of the argument for going direct is that by cutting out fat commissions payable to middlemen you will buy a cheaper pension, where more of your monthly premiums go straight into your pension pot.

The changing structures built into commission-paying plans sold by company representatives and independent financial advisers (IFAs) mean that a large part of the premiums payable in the first few years go in charges.

Many of these plans also carry "allocation rates" of less than 100 per cent, another way of saying that only a part of your money gets invested into the pension fund. Watch out also for "bid-offer spreads" - the percentage difference in the price you pay for fund units and their value when you cash the plan in.

Insurance companies like Legal & General or Scottish Widows have both preserved this changing structure with their direct pension plans. For instance, Legal & General has a 5 per cent bid-offer spread on units in its direct pension. The company also offers an allocation rate of 102.2 per cent on contributions. Deduct 5 per cent from 102.2 per cent, and you find that only 97.2 per cent of your premiums are in fact being invested.

Virgin Direct and Eagle Star have no bid-offer spread. But they do charge pounds 2 a month for contributions into their schemes, which penalises those making smaller payments. Virgin also levies higher-than-average management charges (for telephone providers) of 1 per cent.

Marks & Spencer has no bid-offer spread, but lower allocation rates - down to 95 per cent of premiums - which makes its plan more expensive than, say, Legal & General's. It also charges pounds 1.75 a month for contributions.

Some plans have very low minimum premiums - just pounds 30 a month in the case of Scottish Widows and Marks & Spencer. Look out for contract options such as "waiver of premiums", which insures you against being unable to pay premiums due to ill-health.

Despite these many differences and charges, even the highest-charging direct plans cost less then the average charges payable on commission- paying plans.

Fund choice may be limited at times. Virgin's main pension is a tracker fund that matches the performance of the FT-SE All-Share index. Flemings offers a range of 18 actively managed investment trusts available through its telephone plan. Meanwhile Tesco has available a stable of five funds, which includes both UK and International growth funds.

Despite the growing market for telephone pensions sales, Tom King, a senior manager at Standard Life, thinks that much of the claims about the advantages of buying a pension over the phone are just marketing hype. "We are committed to selling our plans through independent financial advisers and are happy to pay them commission," says Mr King. "The reason for that is simple; savers need advice about pension planning."

Some of the direct providers, including Virgin and Fleming's, will offer their clients specific advice, but only by telephone. Eagle Star offers its customers the option of seeing one of its salespeople face to face, if they so wish.

Ms Willis warns: "Don't confuse this with the genuinely comprehensive advice you can get from an IFA. These plans are a low-cost starting-point. But good financial planing is holistic, and looks beyond just pension provision."

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
ebooksFrom the lifespan of a slug to the distance to the Sun: answers to 500 questions from readers
Sport
Mario Balotelli pictured in the win over QPR
footballInternet reacts to miss shocker for Liverpool striker
Voices
Sol Campbell near his home in Chelsea
voices
News
Kimi the fox cub
newsBurberry under fire from animal rights group - and their star, Kimi
Arts and Entertainment
Ella Henderson's first studio album has gone straight to the top of the charts
music
News
<p>Jonathan Ross</p>
<p>Jonathan Ross (or Wossy, as he’s affectionately known) has been on television and radio for an extraordinarily long time, working on a seat in the pantheon of British presenters. Hosting Friday Night with Jonathan Ross for nine years, Ross has been in everything from the video game Fable to Phineas and Ferb. So it’s probably not so surprising that Ross studied at Southampton College of Art (since rebranded Southampton Solent), a university known nowadays for its media production courses.</p>
<p>However, after leaving Solent, Ross studied History at the School of Slavonic and East European Studies, now part of the UCL, a move that was somewhat out of keeping with the rest of his career. Ross was made a fellow of the school in 2006 in recognition of his services to broadcasting.</p>
TV

Rumours that the star wants to move on to pastures new

Life and Style
fashion
News
Paul Nuttall, left, is seen as one of Ukip's key weapons in selling the party to the North of England
i100
Arts and Entertainment
Russell Brand labelled 'left-wing commie scum' by Fox News
TV
Arts and Entertainment
BBC's Antiques Roadshow uncovers a TIE fighter pilot helmet from the 1977 Star Wars film, valuing it at £50,000
TV

TV presenter Fiona Bruce seemed a bit startled by the find during the filming of Antiques Roadshow

News
people

Comedian says he 'never laughed as hard as I have writing with Rik'

Sport
Steven Caulker of QPR scores an own goal during the Barclays Premier League match between Queens Park Rangers and Liverpool
football
Arts and Entertainment
artKaren Wright tours the fair and wishes she had £11m to spare
News
i100
Life and Style
Kirsty Wark and Camila Batmanghelidjh been invited to take part in Women Fashion Power, a new exhibition that celebrates the way women's fashion has changed in relation to their growing power and equality over the past 150 years
fashionKirsty and Camila swap secrets about how to dress for success
Arts and Entertainment
Joy Division photographed around Waterloo Road, Stockport, near Strawberry Studios. The band are Bernard Sumner (guitar and keyboards), Stephen Morris (drums and percussion), Ian Curtis (vocals and occasional guitar), Peter Hook (bass guitar and backing vocals).
booksNew book on Ian Curtis sheds fresh light on the life of the late singer
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Operational Risk Manager - Asset Management

    £60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

    Year 5/6 Teacher

    Negotiable: Randstad Education Sheffield: Permanent Year 6 TeacherThe job:This...

    KS1 & KS2 Teachers

    Negotiable: Randstad Education Sheffield: KS1+KS2 Teachers required ASAP for l...

    Year 2 Teacher

    Negotiable: Randstad Education Sheffield: Year 2 Teacher The position is to wo...

    Day In a Page

    Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

    'They poured water on, then electrified me...'

    If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
    James Wharton: The former Guard now fighting discrimination against gay soldiers

    The former Guard now fighting discrimination against gay soldiers

    Life after the Army has brought new battles for the LGBT activist James Wharton
    Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

    Panic over Ebola threatens to infect the midterms

    Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
    Premier League coaches join the RSC to swap the tricks of their trades

    Darling, you were fabulous! But offside...

    Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
    How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

    How to dress with authority

    Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
    New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

    New book on Ian Curtis sheds fresh light on the life of the late singer

    'Joy Division were making art... Ian was for real' says author Jon Savage
    Sean Harris: A rare interview with British acting's secret weapon

    Sean Harris: A rare interview with British acting's secret weapon

    The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
    Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

    Tim Minchin interview

    For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
    Boris Johnson's boozing won't win the puritan vote

    Boris's boozing won't win the puritan vote

    Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
    Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

    Tim Wheeler: Alzheimer's, memories and my dad

    Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
    Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

    How We Met: Hugh Bonneville & Peter James

    'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
    Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

    Bill Granger's heavenly crab recipes

    Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
    Radamel Falcao: How faith and love drive the Colombian to glory

    Radamel Falcao: How faith and love drive the Colombian to glory

    After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
    Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

    Terry Venables column

    Premier League managers must not be allowed to dictate who plays and who does not play for England
    The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

    Michael Calvin's Inside Word

    Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past