EATING INTO YOUR RETURNS
Fund with 0.5% fee
Fund with 1% fee£1,400,000 value of pot1,200,0001,000,000800,000600,000400,000200,0000Source: AJ BellYears
05 1015202530£190,000
gapbullying and fibbing their way into
people’s homes so they could hit their
targets. Some homeowners complained
that external meters had even been
fitted without their permission.
Customers who lived in areas where
the meters would not work were never
told, and those whose meters
malfunctioned were dismissed as
crackpots. In short, it has been misstep
after misstep.
Now firms are facing a backlash over
the idea that smart meters might be used
to impose “surge” pricing — where you
pay more at peak times. This is a shame
because it is a terrific idea that genuinely
has the power to lower our bills by
influencing behaviour, making us think
twice before using the dryer at 8pm.
But because no one trusts energy
companies it is being dismissed as a
cruel attempt to punish anyone who
dares have a cup of tea while watching
Coronation Street at its peak time.
There are clearly going to be some
households that are going to suffer
hardship when energy bills start rising in
April. But there are also many who need
help to change their wasteful behaviour
and — whisper it — perhaps higher bills
will actually help them to do that.
Smart meters are a good idea.
Off-peak energy pricing is a good idea.
Let’s take the politics out of them and
put them to good use.
@jimconeyS
mart meters are a good idea.
They’ve just been ruined by inept
regulators and bungling energy
firms.
Why wouldn’t we want a digital
device in our homes that sends accurate
readings of how much gas and electricity
we use to our suppliers?
In a world where I can instantly sell
shares in a US tech company while
sitting on the bus or order a meal while
out for a walk in the woods, why do I still
have to rummage around in the
cupboard under the stairs, or fiddle
around in the rain with the plastic
cabinet outside, so that I can read a
weird dial and then text the numbers on
it to my supplier every month?
The idea that we employ human
beings to then go round to our homes to
check that we are doing this correctly is
also crackpot.
And it is frankly bonkers that we allow
a whole sector of our economy to guess
our bills and expect us to over- or under-
pay for long periods of the year in the
hope that the guessed bill was right. It is
perverse that we then have to go through
the hassle of claiming back money from
these companies.
No, digital meters that end all this faff
are the future. Or at least they should
have been, if the scheme not been
utterly mismanaged. The warning signs
were there right from the very start
when energy firms were allowed toinstall whatever technology they
fancied, leaving us with meters that
stopped working the minute we
switched supplier.
When someone realised how
foolhardy this was, the technology was
standardised, meaning that anyone who
had already had one installed had to
have it stripped out and replaced.
Then we were all told that smart
meters would automatically save us all
money, which was not true (they can
help you save, but only if you change
your habits at the same time).
We were also told repeatedly that they
were free, which we all know they are
not, because the cost is recouped
through our bills.
Confidence was further eroded when
the energy suppliers were handed
ambitious targets to get customers to
upgrade, which led to their meter fittersSmart meters are clever, but
idiots were put in charge
James Coney
Who wants to
faff around
with meter
readings?
DOG GROOMING? IT’S NO BETTER THAN PILATES
In dog grooming
circles, Julie Lalou is a
star. She runs Dogs
Delight salon in
Chiswick, west
London, and will be
part of Team England
in the World Team
Grooming
Championships in
Kortrijk, Belgium, in
September. But while
Lalou has many four-legged fans, she has
not managed to win
over the bean
counters at HM
Revenue & Customs.
Last week she lost
her three-year battle
for a £102,300 VAT
rebate that she
claimed for the City
and Guilds dog
grooming course she
runs. She said itshould be exempt
from VAT, in the same
way private tuition is.
HMRC argued that
dog grooming was
more of a pastime
while Lalou said her
courses led to
qualifications offered
at 88 colleges in
England. “My courses
lead to serious
qualifications — forour field, they are the
equivalent of GCSEs
and AS-Levels.”
HMRC said that
dog grooming was
“not on the national
curriculum” and said
that Pilates was more
widely taught in
colleges but also did
not qualify for a VAT
exemption. The tax
office’s position wasupheld at a first-tier
tax tribunal last week.
HMRC said this
confirmed that “VAT
exemption applies to
private tuition in a
subject ordinarily
taught in a school or
university when it is
supplied by a teacher
independent of an
employer.”
Lalou plans to appeal.MONEY
Follow us on Twitter @ST_Money
‘I’M NOT TURNING
DOWN THE HEAT,
I DON’T CARE
WHAT IT COSTS’
PAGE 12
The pensions
that charge you
five times more
B
anking giants and pension
firms are charging fees up to
five and a half times higher
than mainstream funds.
Annual fees for some older
pension funds are as high as
1.5 per cent compared with
the 0.27 per cent charged by
the cheaper end of the mar-
ket — a mark-up of 456 per
cent, Money analysis found.
Some old tracker funds (which aim to
replicate the performance of a stock mar-
ket index and are run by computer algo-
rithms) that were sold at bank branches
are charging as much as 1.09 per cent.
The difference could cost you thou-
sands of pounds over a lifetime because
fees compound over time and eat into
investment returns, so it is worth check-
ing your costs and asking if it is unclear.How costs vary
One of Halifax’s old UK FTSE 100 tracker
funds charges 1.09 per cent. It is an
“all-in” fee, so covers fund management,
platform costs and any advice given. It is
304 per cent more expensive than a
cheaper, DIY alternative, although Hali-
fax does offer cheaper versions of this
fund to new customers and existing fund
holders wishing to invest more.
Vanguard offers an Isa or self-invested
personal pension (Sipp) and a FTSE 100
tracker for 0.27 per cent. The cost drops
the more you have saved: someone with
£500,000 would pay about 0.2 per cent.
A pension pot of £100,000 that grows
4 per cent a year would be worth
£236,443 after 30 years if fees were
1.09 per cent, according to the wealth
manager AJ Bell. If fees were 0.27 per
cent, it would be £300,007 — an extra
£63,500 in retirement.
The larger your pot, the bigger the dis-
parity. A saver with £500,000 would
have £1.18 million if they paid 1.09 per
cent fees compared with £1.53 million if
they paid 0.2 per cent.
Halifax said: “As our fees cover all the
costs of investing, we believe they offervalue for money. It is easy and free to
switch and we encourage customers to
make sure [the funds] remain suitable.”
Legacy pension funds are harder to
compare, because firms sometimes give
customers a rebate for part of the cost.
The Standard Life iShares North Amer-
ican Equity Index, now part of the range
owned by Phoenix, charges 1.01 per cent
for tracking the FTSE World North Amer-
ica index. There are rebates, so someone
with a £100,000 pot is likely to pay
0.71 per cent. The equivalent tracker and
low-cost Sipp would cost 0.36 per cent.
After 30 years of 4 per cent a year invest-
ment growth the more expensive fund
would have cost £60,252 in fees, com-
pared with £32,044 for the cheaper one.
Standard Life said it offered an “all-in”
charge with discounts that gave overall
value and that its customers may get
further discounts from their workplace.
A handful of customers pay as much as
1.5 per cent for the Royal London UK
Broad Equity Tilt fund, which tracks the
FTSE all-share. It is a legacy fund closedto new customers, and charges reduce to
1 per cent after ten years. Royal London
said everyone would pay 1 per cent by
2024.
The “bundled” fees and rebate system
have been criticised for creating confu-
sion for savers. David Hearne from the
advice firm Financial Planning Partners
said: “Savers should not need a degree in
finance or have to go through smoke and
mirrors to work this out. How can they
check they’re getting value, if they can’t
work out what they are paying?”
Aviva and ReAssure charge 1 per cent
for a UK tracker, although you may get
rebates. You can get a similar fund for
0.27 per cent for a pot of £100,000 and
0.2 per cent for £500,000.
Aviva said 1 per cent was the most a cus-
tomer would pay, not the fee for every-
one, and that charges on older products
were different to new ones. It regularly
reviews products’ value for money.
ReAssure said its fee included all
administrative tasks and that the firm
gave customers a breakdown of charges
in an annual statement, with options for
reducing them, where available.What to do
The fees you pay should be on your
annual statement or your pension firm’s
website. If you do not understand the
set-up or cannot find your fund, email for
an explanation. This information is sup-
posed to be accessible, so it is fair to ask.
Check what other firms charge, the
same way you would get a few quotes
from builders before you hired one.
Depending on the size of your pension
pot, it could be worth seeking help from a
financial adviser. They will charge their
own fees, usually 0.5 to 1 per cent for
advice, but they can help you untangle
the web of charges and contact your pen-
sion firm for you if you are struggling.
Make sure there are no valuable guar-
antees associated with the product you
have now, such as a guaranteed invest-
ment return or scheme-specific tax bene-
fits. You could lose these if you transfer.Check your retirement fund for sneaky fees, says Imogen Tew