(Quick note – this is just a brief review. For a more in-depth review of Momentum Pensions and some of the bonds they are sold with, together with customer comments, please visit here – https://adamfayed.com/zurich-vista-review-rl360-quantum-friends-provident-hansard/).
Who are Momentum Pensions?
Momentum Pensions offer a variety of solutions to UK residents and expats. They are perhaps most famous, however, for their UK pension offerings through SIPPS and QROPS.
Most commonly, this is where a bond is offered (from the likes of RL360, Old Mutual and others) and Momentum is the Trustees.
Where is Momentum Pensions sold?
They are sold worldwide. However, as a lot of clients are British expats, they are especially widely sold in Australia, New Zealand, Canada, Hong Kong, Singapore, Dubai, Qatar, Malaysia, China, France, Italy, Spain and other expat destinations in Europe.
What are the fees and general terms and conditions?
The charges are taken out for as long as 10 years and aren’t very transparent. The reason is that the charging structure that is chosen (commission-free or with commission) can mean that client X is paying more than client Y for the same product.
The fees also compound because now you have the trustee fees (Momentum), the bond fees (Old Mutual, RL360 and the like), the fund fees and the broker fees.
In general, the charges are:
- SIPPS fee of at least £250 a year.
- In terms of the bond, establishment charge of 8%-8.5% upfront charge, taken out over many years, on a gradual basis. This charge lasts for 5-10 years, often working out at 1%+ per year. This charge goes down to 0% after this time.
- Fund charges, which can be anything from 0.1% to 2%, but typically 1.5% on most actively managed funds
- $137.50 every 3 months for admin charges.
- Broker management fee charge – typically 1%.
What’re the positives about the plan?
- You do avoid the risks of UK inheritance tax in certain situations with SIPPS and QROPS, so that is the main benefit of the plan, rather than investment returns.
- You can earn more than in the bank even with high costs
- Low-cost options, such as index funds, are available, but seldom used, within this product.
What are the negatives about the plan?
1. It can be expensive if the wrong options are chosen.
2. Used alongside expensive funds, and trustee fees in QROPS/SIPPS for British expats, the fees compound.
3. Many high-risk products like structured notes are used in tandem with this product. This often leads to losses.
Are there charges for getting out of this product?
Yes, a termination fee of £1,500 from year 1 until year 5, and then £1,000 for transferring to a non-Momentum product.
As QROPS and SIPPS are UK pensions, it isn’t as easy to withdraw money before retirement, although 25%-30% can often be taken out as a lump sum at any point.
What can I do if my investment is underperforming?
Get advice. Often funds and fee structures can be amended. In such cases, simply reducing the other fees, regularly increase performance.
This will make a big difference over time. If you have $100,000 in your account and markets go up 8% per year, for the next 5 years, you are only likely to get 4% per year returns in this product, due to the numerous charges.
Mistakes to avoid in investing
Various bias cloud investors minds, such as recency bias (preferring assets that have gone up most in recent years) and familiarity bias (preferring assets and people we are more familiar with).
Moreover, one of the biggest mistakes investors makes is called loss aversion in cognitive psychology. This means that if investors are down, or not doing well, they wait until the accounts are breaking even before selling.
A simple example would be if you have $100,000 in your account. The value is $95,000. After more reading, you know that deep down the fees are eating into returns. However, as the account briefly hit $101,000 before, you wait until the account recovers to $100,000+ before selling as you don’t want a loss.
I have even seen investors wait 2-10 years to avoid this loss. The rational thing to do is accept the $5000 loss in this situation, as that money can be made up quickly in a cheaper structure.
In addition to that, many investors think size is always good. Having 24/7 account access and log in, flash IT systems and an office in Mayfair doesn’t help client returns; lower fees and better funds would help that.
What can you do if you have a Momentum policy and you aren’t happy?