MSE News: Pension firms promise clearer charges

A question about : MSE News: Pension firms promise clearer charges

Major pension providers have pledged to disclose charges and costs more clearly and consistently to people in workplace...

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Pension firms promise clearer charges

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• Seems a good move. Clearly we all know you don't get something for nothing but it's important to know we are paying. A good investment is worth the cost if it generates a decent return for you over time.
• Nothing new here.These pledges to be more straightforward have been made every year for 50 years.
  Time for Le Guillotine
• You are right, nothing new here. The information has been available for ages. Effectively it is just standardising what most have been doing for ages and what you would expect if you would be buying an individual plan rather than a group scheme.
  Anyone that wanted to know it could find out and read it. Those that dont read it wont be any the wiser regardless of how it is presented. Majority fall into the latter camp.
• There is something new here. What's disclosed at the moment is only part of the truth. The scandal is about what are called trading costs.
  Actively managed funds usually trade (churn) about 80% of the stock in the portfolio once a year. The FSA estimated a couple of years ago that the "round trip" cost of a trade is 1.8% of the transaction so a fund with 80% trading is costing the punter 1.4%pa on top of the fees you currently pay.
  This is why most savvy companies have moved out of active and into passive funds which have reduced transactional costs and offset what they have by lending stock to others.
  WHICH have confirmed this research and estimate that the extra charges are 1.07% pa of a typical fund. Their number is lower because they thought "portfolio turnover" slightly lower than the FSA but either way you should know that you may be paying twice as much in these costs than you do in all the other charges put together!
  And currently these charges are not declared!
  Let me say this again, you do not have to pay these charges- you can avoid them- but you have no way of telling which funds have high transactional charges and which haven't.
  One man, Terry Smith (you may know him as a boxer) but he now is a financier, has been shouting about this for a long time and I'm glad for him that people are at last doing something about it.
  The move to disclose the difference in costs between funds with high transactional charges and those with low ones, will help people not to buy rubbish funds SO IT IS A GOOD THING!
  Don't look this gift-horse in a mouth - this is a big deal.