Personal pensions: latest results
The state of the economy has hit returns on all types of personal pensions. It's not all doom and gloom however. Janet Walford OBE finds some good news despite the gloom
Looking at single contributions, a similar picture emerges. The average AGR on the with profits pension plan over five years is 6.5% pa, on the gross outlay. Even the worst with profits plan beats all the other average alternative investments, apart from the average balanced managed fund.
Over 10 years, the picture is even more favourable for with profits pensions, with not only the average return but also the worst with profits policy return beating the averages of all the other alternatives. Once again, this is based on gross outlay, so once tax relief had been taken into account, the with profits policy would have fared even better.
With profits results
shows actual results for personal pensions, after all charges, over 5, 10, 15 and 20 years for regular contributions of £200 pm gross for with profits policies maturing on 1 January 2009. Performance data for with profits offices closed to new client business are as at 31 March 2008, since these are gathered from Form 59A & B of their individual FSA returns, which are submitted at the end of March each year. The results shown in the Table use the commission levels and charges that applied to the bulk of the companies' business at the time that the policies were taken out. We have also shown the difference between the payouts for this survey and those of last October, apart from those of the F59 companies.
Apart from a minuscule increase of £56 in payout over five years for regular contributions from Axa, all the other results are down on those of our last survey, in October 2008. Biggest fall was from Standard Life's stakeholder plan, down by £2,577, a drop of nearly 18% in five months, and enough to push it from second to fourth quartile.
It must be galling for policyholders to realise that they have paid an additional £1,000 in gross contributions over the period between our two surveys, only to find that open market option values have fallen by more than that amount. This is the case for Co-operative, Friends Provident, Legal & General, NFU Mutual, Norwich Union, Prudential, Scottish Equitable, Scottish Widows, Standard Life, and Wesleyan, ironically all offices that are still open to new client business.
Of course, policyholders who cash in their plans early may well be caught by a market value adjustment to the payouts, so whilst they may have saved £1,000 in gross outlay (£800 net of basic rate tax), they may have lost more than that from the maturity payout.
Over 10 years, Axa again bucks the trend with an increase in payout of £3,926, most of which comes from an increased terminal bonus payout, up from £1,339 last October to £6,274 for this survey. Axa is one of only 13 with profits personal pension plans still open to new client business.
