The Construction Workers’ Pension Scheme which is affiliated to the employer trade body Construction Industry Federation has been very successful in getting financial contributions from their nearly 50,000 members –
– but have their group scheme members’ funds performed better than other open market alternatives?
Below we take a look at the funds’ performance relative to their annual management fees and allocation rates – so that you can assess the question of whether such group schemes are really passing on the savings of having a ‘captive audience’ ergo reducing marketing, operational and trustee legal/oversight costs.
CIF / CWPS performance vs alternatives
Assessing CPWS fees vs other alternatives
As a employee (or indeed an employer) in the private sector where the only game in town is a defined contribution pension – it is important to compare the market performance over a 5,10, 20 period whilst also being aware of negative compounding effect of outlier annual management charges and allocation rates.
- A placement fee is charged at entry point to some fund schemes – obviously this immediately dilutes the initial capital at inception – a high fee here would be sub-optimal especially in the context of ‘buying the dip’ where unit costs are low.
- Most every fund has an annual management charge (as the money manager has to make an income for the services it provides) – however there is often a very considerable spread i.e. 1% – 4% with respect to such changes and often your monies are ultimately channelled anyway via a series of manager intermediaries into very similar if not identical stockmarket instrument products in some cases.*
- An allocation rate is the amount of your pension/investment which is actually invested in performing assets – in many cases a fund manager will retain a percentage (often a reasonable 1% but sometimes as high as 4%!) as a non-deployed cash carry which is a effectively an additional fee and ergo a compounding drag on your policy performance irrespective of market conditions.
IF YOU ARE AN EMPLOYEE OR EMPLOYER IN THE CONSTRUCTION INDUSTRY – GET IN TOUCH BELOW TO GET ADVICE ON THE WIDER MARKET OPTIONS. YOU MAY BE ABLE TO IMPROVE PERFORMANCE AND REDUCE COSTS.