Customers losing thousands on pension fees, commissions

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Pension-selling companies are taking the equivalent of 80% of money paid into some pension plans out in fees and commissions, BBC Panorama has found.

In one HSBC pension plan, £120,000 paid in over 40 years would result in fees and commissions totalling £99,900.

The company said its pension product is competitive.

The pension providers' trade body said customers need to look at overall investment growth of a pension plan, rather than just fees taken out.

Panorama looked at a number of pension plans which take out large amounts of money in fees, using figures from the companies themselves and from the finance education body Consumer Financial Education Body (CFEB).

Of the main pension companies surveyed, 21 out of 24 volunteered the information to CFEB and confirmed it as accurate.

Industry experts have raised concerns about the amounts being withdrawn by some pension plans and the figures come at a time when individuals are increasingly being asked to shoulder the risk of seeking financial advice and taking life-changing investment decisions with little or no expertise.


  • Panorama: Who's Taken My Pension?
  • BBC One, Monday 4 October at 2030BST
  • Then on BBC iPlayer in the UK

Panorama looked at someone who pays in £200 a month to a pension plan for the next 40 years. With tax relief, those payments would amount to £120,000. Assuming 7% growth, the pension provider that would take the most in fees was determined using figures supplied by the companies themselves.

Profit margins

The £99,900 fees accrued on the HSBC World Selections Personal Pension are the equivalent to 80% of monies paid in being taken out again in fees and commissions.

HSBC said it takes a 20% profit margin on the pension through the fee structure. It said it offered "good value for money" and was "certainly not one of the most expensive pension schemes in the market".

The Co-Op Individual Personal Pension would take out nearly £96,000 in fees across 40 years of investment growth upon deposits of £120,000.

Legal and General's Co-funds Portfolio Pension would take out about £61,000, according to the company.

The Co-Op said extra charges reflect the higher cost of external fund management. It stated: "Our pension charges are fully transparent, and include not only investment costs, but also the administration expenses and financial advice provided.

"The vast majority of our customers' pensions invest in funds with charges lower or equal to the 'stakeholder' government-set levels."

Fees doubled

In a statement to Panorama, Legal and General did not comment on criticism of the £61,000 level of fees.

In the City, some experts say high fees risk turning some pensions into what are known as "dog funds", or poorly performing investments.

Malcolm McLean, a pensions consultant, says the problem is a lack of transparency when the pension is sold and what seems like a small annual percentage charge grows each year in real terms as the fund gets bigger.

"You suddenly find that after 30 or 40 years there's a terrific amount of money lost and I don't think many people actually understood that when perhaps they took out the pension," he said.

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Dr Paul Woolley, who used to control a multi-billion pound investment fund, is now a finance academic at the London School of Economics.

He said fund management fees and brokerage have doubled over the past decade, amounting 1.5% in fees.

"But the net return to pension funds collectively has reduced. And it's reduced by the amount that fees have gone up by."


Industry experts said the fee rises are related to how pension funds are being managed as customers are now likely to incur management fees, an annual fund manager charge and other fees including establishment fees, dealing fees and brokers' bonuses.

Maggie Craig from the Association of British Insurers, the pension industry's trade body, said the figures around fees and commissions are open to interpretation and long term success of a pension fund is a better way to judge whether or not customers are getting value for money.

"What consumers are interested in is how much the money they have put into their pension has grown by. It is incorrect and irresponsible of Panorama to look at the amount taken out in fees in isolation to how well the fund has performed," said Ms Craig, adding that the majority of pension customers pay between 0.5 and 1% in fees.

The government plan to tackle some of the issues in the pensions industry is the 2012 introduction of auto-enrolment and the National Employment Savings Trust Scheme (NEST).

Employers will be required to automatically enrol employees into a workplace pension and make a minimum contribution. The employee and the government will make further contributions to the scheme.

Who's Taken My Pension? BBC One, Monday, 4 October at 2030BST and then available in the UK on the BBC iPlayer

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