Trying to understand charges

[MyNameIsUrl]

I have an old Aviva pension fund from an employer I left a few years ago, and I’m trying to understand the charges.

One of the funds within the pension is Aviva Pension BlackRock World ex UK Equity Index Tracker IE/XE, ISIN GB00B28T4V17, which has an annual management charge of 0.21% quoted in my scheme documentation and also when I log in to my account. However, the ‘Factsheet’ quotes an AMC of 0.55% but says ‘These may or may not be the same as your policy’. This confuses me as to what the charges actually are.

In the online account I can see a handful of units from each holding are being sold each month – the values are not given but I estimate that over the year they may well add up to the figure of 0.21% which is given as the fund charge. This may therefore be what I understand as a ‘platform’ fee, but what I find unusual is that other funds have different percentages as the ‘platform’ fee in addition to the AMC.

I have a further level of confusion: the factsheet shows the top 10 holdings – Apple, Microsoft etc. But, when I google the ISIN I find (in markets.ft.com) that the holdings are all funds, and the largest (BLK Aquila US Equity Index 1 Pen) at two-thirds of the total value has charges of 1%.

Is this multi-layering of charges normal or am I misunderstanding? I’d assumed that pensions via employers were low charges because of the bulk-purchasing effect of hundreds of employees. Selling a handful of units each month from every one of my holdings was also not what I’d assumed (though there seem to be no additional transaction fees). The fund-within-a-fund also seems a bit unnecessary if I’ve understood it right. Does it seem likely that I’m paying 1.76% in total charges on a tracker?

[TedSwippet]

Aviva should be able to answer your question more fully, but the likely response is that you are paying just 0.21% for everything, and the other documentation you are reading is either more 'general purpose' than for your specific plan or directed at other plans.

I have an old Friends Life personal pension, now Aviva, and hold BlackRock trackers in it. I pay 0.19% for this pension (lucky me, a whole 0.02% less than you!), and then whatever 'additional' charge each fund has, but... the BlackRock funds have a 0% additional charge, and these are the only ones I use, or need. So it's indeed 0.19% all-in. And like you, Aviva auto-sells a few units (or fractions thereof) every month to take their charge. Adding up the small monthly sales for each fund and then multiplying by 12 gets me to exactly 0.19% of my current pension balance.

BlackRock seems to play some organisational games with the way it holds some of its own less general funds in its more general ones, but this appears to be for convenience and/or 'simplification' rather than as a way to double up on multi-level charges (that is, BlackRock funds can hold other BlackRock funds at no charge). I've certainly seen no signs of BlackRock charging shenanigans, and wouldn't suspect that they would be underhand. And the way Aviva runs this pension doesn't match my SIPPs, but overall I'm quite happy with it.

TL;DR -- Probably nothing at all untoward going on here, but Aviva should be able to fully put your mind at ease.

[Alaric]

In the online account I can see a handful of units from each holding are being sold each month – the values are not given but I estimate that over the year they may well add up to the figure of 0.21% which is given as the fund charge. This may therefore be what I understand as a ‘platform’ fee, but what I find unusual is that other funds have different percentages as the ‘platform’ fee in addition to the AMC.

If units are being sold, it's likely that's being pocketed by Aviva. The Black Rock charge would be included in the price of the units.

You could ask the naive question as to why your units are being nibbled at. The more sophisticated question is whether you are in a Black Rock fund at the declared cost, or a "mirror" operated by Aviva which has additional charges.