Back in the mists of time – 2005 to be more precise – I decided that I wanted to pay more into my pension.
At the time I was at the BBC and had a final-salary pension scheme, so the only way of making overpayment was to open a separate, money-purchase plan with the provider recommended by the corporation.
This scheme offered a host of investment options such as emerging markets, Europe, the US and corporate bonds, as well as standard cash savings.
I was intrigued as this meant that I would be able to add balance to the rest of my portfolio through the use of a small, tax-efficient private pension.
However, digging into the detail I was horrified at the upfront fees levied by this provider.
One of the funds, for instance, charged an annual fee – regardless of performance – of 1.8 per cent of the fund total.
Presuming that the pension fund would return 5 per cent on average a year – quite an optimistic rate of return considering what has happened in the world since – then nearly 40 per cent of total growth would be trousered by the pension provider for doing actually not a great deal. This compares to the best low-cost personal pensions which charge an annual fee of 0.5 per cent or less.
I decided not to pursue the scheme and actually told the pension trustees what I thought of the charges being levied and I’m happy to say soon after the provider – after refusing to lower its fees – lost its contract with the BBC.
Yet nearly a decade on and I have had a sense of déjà vu hearing the rather watered down recommendations of the Office of Fair Trading (OFT) to pension funds.
In essence they have done nothing more than issue a general warning about high fees and asked the pension industry to conduct an audit of its schemes to see that the charges are fair and transparent. Crucially, there is to be no cap on fees.
The problem doesn’t lie so much with the likes of the National Employment Savings Trust or bog-standard stakeholder schemes where fees are generally low, but with those that date back many years and decades – the mists of time again – where fees were higher and predicated on unrealistic growth expectations (wishful thinking) of 7 or 9 per cent per year.
What the OFT has done is simply kick the can down the road again, and although there will be lip service from the likes of the Association of British Insurers, these old contract schemes will probably continue to offer poor value to their members.
It’s no wonder that so many people feel captured by their pension rather than engaged as is highlighted by the continued presence of pension liberation schemes as explained opposite.
Mis-selling too close to home
When it comes to putting in a claim for payment-protection insurance (PPI) mis-selling, I have always been one of those who urges people to do it themselves and ignore the no-win no-fee firms which can take up to 40 per cent of the compensation subsequently paid out.
Instead, I point people in the direction of brilliant resources such as moneysavingexpert with its easy-to-print letters.
However, judging from a relative’s experience with the Halifax and the Co-Op in trying to get back her PPI (and the interest charged on the loan) I can sort of see why people decide to let a third party take care of things.
The questions asked are not only downright intrusive and irrelevant (such as why did you need the loan) but seem almost designed to spark anxiety.
As for the so-called telephone “service” she has received from the Halifax this has been in the truest traditions of British bureaucracy, complete with errors and misunderstandings being compounded to a point where the caller just wants to give up.
Now I have heard a lot from banks like the Halifax in recent years about vexatious claims for PPI mis-selling from claims-management firms and have seen evidence to support this.
However, when someone close to you is in the middle of the system you can clearly see that the main fault for delay lies not with claims firms but with the banks.
In short, the claims-management firms are a symptom of the greed of the banks both originally in routinely and callously mis-selling but now in trying their best to duck their responsibilities.