| old style Personal Pension plans [message #384897] |
Fr, 05 Mai 2006 09:50 |
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Hi,
I have being doing some work in relation to older style Personal
Pension plans (ones with Bid/Offer Spreads, monthly policy fees, and
other wacky charges) - of which there are probably hundreds of
thousands still in force.
My question, which never fully occured to me until yesterday, relates
to the Bid / Offer spread (the difference between the cost of buying
units and the cost of selling units).
On a plan with 100% allocation and a 5% bid/offer spread, you know that
=A395 will be invested (before the other charges start coming off).
But lets say it has a more convoluted charging structure - say 103%
allocation, and a 5.25% bid/offer spread.
I take it that the correct method is to multiply the premium by 103% -
so =A3100 becomes =A3103 - then a 5.25% charge is taken from =A3103, not
the initial =A3100 - so the amount invested is =A397.59.
Then other charges and calculations can be done on the figure of
=A397.59
Correct ?
Rgds
Neil.
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| Re: old style Personal Pension plans [message #386885 ] |
So, 14 Mai 2006 10:55 |
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<neil [at] invidion.co.uk> wrote
> On a plan with 100% allocation and a 5% bid/offer spread, you know
> that £95 will be invested (before the other charges start coming off).
>
> But lets say it has a more convoluted charging structure
> - say 103% allocation, and a 5.25% bid/offer spread.
>
> I take it that the correct method is to multiply the premium by
> 103% - so £100 becomes £103 - then a 5.25% charge is taken
> from £103, not the initial £100 - so the amount invested is £97.59.
You could calculate it *either* way, and
you should get the *same* answer! ...
£100 x 103% = £103, then
reduce by 5.25% gives £97.59.
-OR-
£100 reduced by 5.25% gives £94.75,
which allocated at 103% is again £97.59.
BUT - Don't forget that the bid/offer spread
is in the unit prices, but the allocation is not...
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