Tuesday 1 November 2011

Three things I saw in the news today - part 1

First: http://www.guardian.co.uk/money/2011/nov/01/state-pension-scheme-ats

"Now: Pensions, set up on a not-for-profit basis, will charge £18 a year for administration plus a 0.3% annual management charge, compared with the 1.25%-1.5% common in Britain."

1.25-1.5% may be common in Britain, but that's often for a managed fund with specific risk expectations.  NEST is going to be the cheap and cheerful provider that this new scheme is meant to be competing with and a quick look at the TPAS website shows that they're looking at charging 1.8% on contributions and then 0.3% annually.  Just looking at the charges, we can see that if you contribute £1,000 a year it will cost the same in both schemes; with less than £1,000 a year you'd be better off in NEST and with more than £1,000 a year you'd be better off with Now:Pensions.  That's completely ignoring investment choices and returns, so the real picture may be rather different and we'll have to wait and see how both of them do.

My issue is that that's not the impression that the article gives - it reads like an advertisement.  Why not say how much the annual charge for NEST will be in the article, rather than using the rate that's apparently common in Britain (without any citation).

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