Two million people could together save around £500m a year by switching their personal pension to a ...
Two million people could together save around £500m a year by switching their personal pension to a 1% stakeholder pension, Clerical Medical says.
Basing its figures on a rather weak ground, CM estimates that around 1,980,000 people - as set out in the government's original target group for stakeholder pensions - would collectively save a total of £475,200,000 a year.
CM arrives at this conclusion after comparing a personal pension fund - estimating that this fund both has a transfer value of £30,000 as well as an Annual Management Charge (AMC) of 1.8% - with a fund with an AMC of 1%, like that of a 1% stakeholder fund.
Accordingly, a person with an AMC of 1.8% would have to pay a total of £540 in charges a year, whereas the total charges per year would only be £300 with an AMC of 1% - giving a saving of £240 per year.
Neglecting any additional charges, CM arrives at the sum of nearly half a billion a year in savings by multiplying £240 with the number of people set out in the government's target group.
Despite this, CM says, only 1% of consumers - that is fewer than 20,000 people - who are eligible for a stakeholder pension, have changed their existing personal pension plan.
Unquestionably promoting stakeholder pensions, CM adds that a majority of personal pensions have an AMC above 1%.
In 1995, around 63% of all personal pensions sold had an AMC of over 1.41% and a further 32% were over 2.01% with some pensions as steep as 4% AMC.
Head of Sales at Clerical Medical Graeme Riddoch says:
"It is amazing that so many people might have missed this opportunity to save money. Anyone who is in this situation should contact an independent financial adviser to find out if it would be worth their while to switch to a 1% stakeholder friendly pension."
But she adds that: "It may not be the right solution for everyone so it is very important to seek professional advice on this."
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