How do charges affect my retirement annuity plan?

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The contributions you make to your pension plan buy accumulation units in your chosen funds.

There are four main charges that make up the charging structure on your pension plan:

Annual management charge

There is a standard 1% annual management charge (AMC) incorporated into our daily fund prices. Find out more about AMC.

Bid/offer spread

Units are bought using the offer price, and are subsequently valued (or sold) using the bid price. The offer price is 5% greater than the bid price. So, if you purchased £100 of units (before any allocation rate is applied), the subsequent value of those units on the same day would be £95.

Allocation rate

This is the rate that is applied to your contributions and is normally shown as a percentage. Under this type of product, the standard allocation rate for regular contributions is 100%. The allocation rate for any one off contributions (sometimes referred to as single premiums) varies the closer you get to your retirement date.

Administration charge

Where regular contributions are made (or have previously been made) an administration charge is applied. The level of this charge will depend on whether contributions are still being made and the actual frequency of those contributions.

The table below sets out the administration charge levels and how often they’re applied:

Contribution frequency Charge amount Frequency of charge
Monthly £2.00 Monthly
Yearly £24.00 Yearly
No contribution currently being paid £12.00 Yearly
Monthly Contribution £100.00
Administration charge £2.00
Allocation rate 100%
Offer price £10.00
Bid price £9.50
Units bought calculation
(Contribution – Administration charge) * Allocation rate / Offer price
(£100 - £2.00)* 100% / £10 = 9.8 units
Valuation calculation
Units * bid price
9.8* £9.50 = £93.10

The examples below show how the charges on your retirement annuity plan may apply on a yearly basis. The figures shown do not reflect the actual charges but show at a high level how the charges operate based on some hypothetical fund values. Please select the section which reflects whether you're making contributions.

Accumulation units annual management charge (AMC) 1.00%
Administration charge £24.00
Bid/offer spread 5.00%
Assumed regular contribution each month £100.00
Accumulation
unit value
AMC Administration
charge
Bid/offer
spread impact
Total
£25,000 -£250 -£24 -£60 -£334
£50,000 -£500 -£24 -£60 -£584
£75,000 -£750 -£24 -£60 -£834
£100,000 -£1,000 -£24 -£60 -£1,084
£125,000 -£1,250 -£24 -£60 -£1,334
Accumulation units annual management charge (AMC) 1.00%
Administration charge £12.00
Bid/offer spread 0.00%
Assumed regular contribution each month £0.00
Accumulation
unit value
AMC Administration
charge
Bid/offer
spread impact
Total
£10,000 -£100 -£12 £0 -£112
£20,000 -£200 -£12 £0 -£212
£30,000 -£300 -£12 £0 -£312
£40,000 -£400 -£12 £0 -£412
£50,000 -£500 -£12 £0 -£512

For more information

The examples shown above are for illustrative purposes only. If you have any queries or would like to know more about how this applies to your pension plan, please contact us.