After some solid thought you have decided to invest in a Personal Pension Plan. A number of financial services providers offer Personal Pension Plans. We at ĠEMMA strongly suggest that you shop around before you make a decision. We ask you that, as a minimum, you should take following matters into account:
- Ask for the key facts document for each pension plan you are considering. Sit down with a representative from the provider and ask him or her to walk you through it.
- Specifically ask for what charges you will have you have to pay and when – charges such as the Entry Fees, Policy Fees, Annual Management Cost, Transaction Costs, Allocation Rate, and hidden costs; and ask him or her to quantify them for you.
- Make sure that you understand how much it will cost you if you wish to transfer your personal pension plan to another financial services operator.
- Make sure that you understand how much it will cost you if you want to top-up your annual contributions.
- Ask about the risk funding categories the product offers – cautious, balanced, and aggressive; how the product is diversified.
- Ask whether the fund has a default guide path – that it is it automatically changes the risk balance within your portfolio over time: from equity when you are still young to secure bonds or cash as you get closer to retirement.
- Make sure you understand the difference between a product that is unit based and a product that is with guaranteed profits.
- Make sure that you understand very clearly promises of ‘high’, ‘guaranteed’, ‘hedged’ or ‘absolute’ returns: if you misunderstand them these may cause you problems down the road.
- Make sure that you understand how much it will cost you if you wish to transfer your personal pension plan to another financial services operator.
- Make sure that you understand how much it will cost you if you want to top-up your annual contributions.
- Make sure that you understand what happens in the event that circumstances arise in your life that will require you suspending your annual contributions for some.
- Make sure that you understand how success works in the event of your death.
- Make sure that you understand how the personal pension plan is shared in the event of a separation or divorce.
- Ask whether you will have real time access to the performance of your pension plan, and if not how often will you receive an investment report and a statement of account.