The four main factors in building up a good pension fund are quite simply:

  • How much money is being invested (monthly, annual, one off, transfers etc).
  • What level of investment performance is earned.
  • How much your pension provider charges you.
  • How long you invest for.

Many members of company pension schemes called Group Personal Pensions or Group Stakeholder Pension Schemes are often delighted with the low annual management charge that they pay. As long as you remain in the same employment you will continue to benefit from low pension scheme charges ranging from 0.3% per annum to 1% per annum. What many don’t realise is that when you leave employment and, by default, leave the company pension scheme your annual pension fund charges can shoot up!

This is known in the industry as the “Active Member Discount” but should probably be renamed “The Scheme Leaver Penalty”.

So, what is happening?

The Pensions Minister, Steve Webb, has today announced that it is the governments “intention” to bring about changes to this practice. This is being done via an amendment to the Pensions Bill 2011.

However, if I was a scheme leaver and thought I was being penalised through high pension charges I’d rather not wait for the legislation. The sooner you act the sooner you could be benefitting from lower charges. I wrote previously about BBC’s Panorama Exposes Need For Pension Fund Advice and if you would like us to check if you’re being penalised and what you can do about it then please call the office on 0845 0179 578 and ask for me personally.

Best wishes,

Rob Simpson