Some high-end private pensions are offering surprisingly low rates, an investigation has revealed.
Sipp customers are generating near-zero returns on cash held within their plans, the Daily Telegraph reported.
The problem has been exacerbated by the fact that many pension holders have decided to liquidate stock holdings in the wake of the market volatility caused by the credit crunch.
This could lower the value of the pension pots over the long-term, leading to people retiring on a lower income than they had been expecting and increasing the attractiveness of equity release plans.
Figures cited by the newspaper suggest that around £3 in every £10 of Sipp money is currently in cash.
Speaking to the Daily Telegraph, independent pension expert Dr Ros Altmann commented: "It seems that once customers are in, there is nothing to stop providers making a fortune on the cash balances of older savers.
"If the banks pay only 0.5 per cent on one-year money, but can earn much more by making their own one-year deposits, then they are effectively taking a few per cent out of the pension fund – in addition to the charges that are being levied as well, of course. It is certainly a hidden charge."
Posted by Richard Planner
