Incredible Shrinking Millions In UK Pension Savings

Pensioners with cash in the bank face a double whammy - watch their incredible shrinking pension funds lose money or invest the cash in annuities that pay a meagre return.

Tens of thousands of pensioners with cash stashed in special funds or bank accounts aimed at protecting them from low interest rates and vagaries of the stock market are watching their pensions drain away with the arrival of every account statement.

Standard Life has told 23,500 savers with £912 million in the company’s pension managed cash fund that the fund’s 1% annual administration charge is higher than the interest return.

SIPP losses to keep piling up until 2012

Standard Life is the UK’s largest SIPP provider and has warned savers to expect more losses until the end of 2011.

Other big losers, according to analysts Trustnet, are savers with Windsor Life, Nationwide’s deposit pension fund, Aviva and Woolwich.

One SIPP, run by James Hay, an Abbey Group company, pays interest of 0.00001% - just 1/100,000th of 1% - while charging an annual administration fee of £455. According to the MoneyMail, James Hay has stated no fund warning will be sent to savers.

Threadneedle UK Money Securities is staking up massive losses and acts for several pension firms - Axa savers using it have lost 12.4%, Legal and General 13.1% and Skandia 15.6%. The differing losses are because some pension firms charge more than others.

QROPS solution for non-UK pensioners

Many pensioners facing these losses are living outside the UK and can take a simple step to save money by transferring their funds in to an offshore pension called a QROPS.

QROPS allow more flexible investments in a low tax country and QROP holders have no requirement to buy an annuity, leaving a pension fund as an asset to pass down through an estate outside the grasp of the taxman for inheritance tax.