View more on these topics

Skandia says investment success beats charge cuts

Skandia says a successful investment strategy would outstrip the Government’s claimed 25 per cent improvement on pension values from cutting fund charges.

The company’s analysis shows that an improvement in investment performance from the worst returns to average returns can increase pension values by over 50 per cent.

In the Pensions White Paper, the Government said that reducing funds’ annual management charge from 1.5 per cent to 0.5 per cent could boost the value of a pension fund by 25 per cent.

These calculations assume that an investor saves consistently from the age of 25 until the future state pension age of 68. Skandia’s research is based on a median earner with a salary of 23,000 making total contributions of 8 per cent.

An improvement in average annual fund performance from the worst to the average balanced managed fund over the past 15 years – from 4 per cent to 5.5 per cent – would increase the pension fund size after 43 years from 210,520 to 317,534, a rise of 51 per cent.

Head of marketing Billy Mackay considers that the results demonstrate that asset allocation is crucial for determining returns, therefore highlighting the risks of millions of people being herded into a default fund without advice.

Mackay says: “A simple analysis shows that while the Government’s claim is theoretically true, the effect of higher charges can be more than compensated for by even a moderate improvement in fund performance. Simply put, good advice should more than pay for itself.”

Pensions Policy Institute research director Chris Curry says: “A number of factors, including employer contributions and investment returns are more important than charges but there is no guarantee that advice will definitely improve returns.”


Merchant goes for revamp

Merchant Investors, has relaunched its self-invested personal pension, having revamped its range of fund links and changed the charging structure to ensure investors only pay for the services they use.

Abbey courts near-prime borrowers

Abbey has denied it is already operating in the near-prime market despite offering deals to borrowers with county court judgments.It gives the same rates to clients with CCJs as those offered to prime customers.Its official line is that it is exploring entering the sub-prime market later this year but some intermediaries think it is already […]

Aifa and CII welcome FSA exam proposals

Aifa and the CII have welcomed FSA proposals to retain the existing exam regime for advisers.In a consultation paper published this week, the FSA announced plans to keep the current exam structure while reducing the Training and Competency sourcebook to a third of its size.The FSA says its long term goal is to remove the […]

‘Mifid nightmare’ could pose threat to independent label

European commissioner Charlie McCreevy has raised doubts over the future of the payment menu and FSA-required advi-ser labels such as independent and whole of market after warning that Mifid could turn into a “practical nightmare”.Speaking at a high-level city group event in London, the European commissioner for internal markets and services said supplementing the single […]


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