Projections and effects of charges Flashcards
Introduce the projections
Charges and inflation?
What I’d like to take you through now is some of the projections of where your investment could be in 10 years time.
These projections are net of charges, and are in today’s terms, which means we’ve assumed a rate of inflation of 2% each year - and gives an idea of the buying power of your projected fund.
Describe the rate of growth
The assumed rates of growth are not guaranteed, nor are they minimums or maximums of what you may achieve - you may get back less than what you invest. The rates we use are maximums that are set by the Financial conduct authority.
Explain the options at retirement
- Your fund value in X years time could be worth £X in today’s terms.
- Drawing an income from a pension is really flexible, and there’s lots of different ways of doing this, and this would be something that we have a conversation about closer to the time.
- But for now, one option you could choose is to take you 25% tax-free aspect of your pension as alump sum, then with the remaining 75% take out a taxable pension annuity to provide a guaranteed income for life.
Introduce the effects of charges page
Before I break down what charges you will pay, I’d now like to direct your attention to page 7 which shows the effect that charges can have on the growth of your investment.
This table shows, using the mid rate of growth discussed previously, and inflation at 2% each year, how much your fund would be worth if there were no charges, if only the product charges were taken, and then finally after all other charges are taken.
When discussing the effect that charges can have on an investment, what is mandatory to read verbatim
“How the charges can reduce the growth rate of your investment” section at the bottom of the page.
Best practice when discussing the effects that charges have on the investment.
- Reiterate that investing is a medium to long term strategy
- Need to ride out market volatility but also the effects that charges have.
- Can touch on the modest rate of growth used - historic data from fund factsheets show that its possible to receive greater performance but not guaranteed.
