View more on these topics

Huge cost to savers revealed in ACT cut

The Government&#39s decision to axe advance corporation tax credits will cost savers more than the cost of commission or product charges, according to Scottish Life head of pension strategy Steve Bee.

He says while product providers and IFAs are being forced to show consumers the costs of running and distributing their pension, the real cost of removing tax benefits is being hidden from investors.

For someone contributing £100 a month for 20 years into a pension scheme, by maturity, provider charges excluding commission would be around £2,692, based on a growth rate of 7 per cent, according to Bee&#39s estimates. Commission charges for IFAs would also cost around £2,692 by the end of the policy.

The ACT tax credit would have been worth £2,935 to the retirement fund for the same person, using the same growth rate. This represents 8 per cent more than the cost of either commission or provider charges, making it the biggest cost to a pension scheme.

The ACT credit was abolished in Chancellor Gordon Brown&#39s first Budget in 1997. Its removal is estimated to have given the Treasury £5bn from pension funds and has been blamed in part for forcing final-salary schemes to close.

Bee says the cost of removing ACT credits is the biggest charge affecting people&#39s pension fund and needs be made clearer to the public. He says: “Most people accept there are charges for running a pension scheme and that paying for advice is worthwhile. But there is another charge which has a greater effect on final fund values which we are not required to tell people about. This is a highly significant cost which seems to go to the Treasury through sleight of hand.”


IFAs clash on bond rates

Two leading investment IFAs are embroiled in a spat over guaranteed income bonds, each claiming it distributes bond with the best rates.The dispute arose after a client of Baronworth Investment Services received marketing literature promoting Chase de Vere&#39s product as market leader. The client invested a lump sum with Chase, only to find Baronworth&#39s product […]

How Whitechurch securities constructs the pension tables

When we set out to analyse personal pension providers and their funds, we majored on the factors on which we would place the greatest emphasis when choosing companies that we would be happy to put forward to our own clients. Clearly, there are other ways of analysing things and different criteria would probably produce different […]

Lack of profit puts Aim off target for IFAs

Aim listing may no longer be an option for IFAs looking to capitalise their businesses, according to analysts.Some analysts believe only very big IFAs with proven business models can now attract institutional investment while smaller firms will have to rely on mergers, acquisitions or provider investment to grow their businesses.Institutional investors warn that the failure […]

The final countdown

Hardly a day passes without the media predicting the death throes of the traditional final-salary pension scheme – with good reason as the evidence of the acceleration of scheme closures is overwhelming.There are a number of factors driving this change but the single factor standing at the head of the list is the innocuous-sounding Financial […]

The death of retirement – a boost for protection?

According to our recent report on the death of retirement, changes in workplace pension provision mean that coming generations of retirees could have a radically different experience of retirement from their parents. The average contribution rate into an old-style final salary pension was around 20% of total wages, the statutory minimum for a new automatic […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm