Turning people off pensions, by Aviva

Along with thousands of other workers employed by small-to-medium sized enterprises in the UK, I was auto-enrolled into a personal pension scheme on 1 July.

All employees have the option of opting out entirely, but my employer had also offered an opt-out with joint contributions made into my self-invested personal pension instead.

I had decided already to take the latter route, and the time I spent poring over the 17-page Policy Features document from Aviva that detailed the terms of my company pension certainly reinforced the reasons for my choice.

If I am confused and bamboozled by much of its content, what hope does the rest of the population have?

uninterested

I was appalled at Aviva's presentation of information on where my hard-earned pension contributions were going to be invested. The covering letter stated that the 'policy features pages detail what contributions are being made and what the charges are'.

In common with many others, my employer had selected the 'default' option of auto-switching - described as 'lifestyling/lifestaging and phased switching'. This much I understand. Whether or not this is a good choice for most auto-enrolled pension savers is debateable, but it's an acceptable route for the disengaged pension contributor.

But for those people who have heeded calls from government and retirement experts to take more of an interest in their retirement choices and outcomes, a document such as this will not reinforce that desire; and it will arguably leave less involved pension savers as uninterested as ever.

My main point of despair relates to what followed from the invitation to 'take a look below to see the funds you'll move between' as part of the Lifestage investment approach.

I've been editing Money Observer for 16 years and this experience means I'm pretty good at finding and interpreting information about funds and investment trusts. However, even I struggled with this bunch.

Gobbledygook

Had I stayed with Aviva my assets would have been invested between three funds. These were listed as 'AvBAq Ovr15Yr CorBndITrS6'; 'Av Divers Asset Fd 11 S6'; and 'Av Deposit S6'.

After half an hour I was regretting my decision to dig out the strategy and aims of these funds on the Aviva website, rather than spending a pleasant sunny evening in the garden. Nevertheless I persevered and finally tracked them down.

I'm pretty sure that these funds are Aviva Pension BlackRock Aquilla Over 15 yrs Corporate Bond Tracker S6, Aviva Pension Diversified Assets Fund II S6 and Aviva Pension Deposit S6.

So far so good (eventually). Information in the factsheets for all three is presented concisely, and it's reassuring to see that two of the three funds are beating the relevant Association of British Insurers sector averages. However, because the Diversified Assets fund 'is under 1 year old, we are unable to show any performance figures'.

Fair enough. But now I'm interested in what annual charges are being applied to the funds in my list, particularly as I'm informed that 'the returns on the lower risk funds may be lower and might not cover our charges'. However, all three factsheets tell me to 'see policy documentation or aviva.co.uk fund centre'.

OK, I've seen there is a two-page 'Charges' section in my policy pack. It has some information on how an 'Annual Fund Charge' is made up: a combination of the annual management charge and something called an 'annual fund charge adjustment', which may be 'a positive or negative adjustment to the annual management charge'. While that is obtuse, there may also be a 'fund manager expense charge' applied to some funds, apparently.

fund charges

But while these two pages provide some general and opaque information on how charges might be applied, nowhere does it say what I will actually be charged for my investments. I turn back to an earlier section, where there is a shorter version of the charges information.

Yes, I find an 'annual fund charge will apply to your plan' and 'as a benefit of being a member of your company's pension scheme, we'll apply a lower annual fund charge to your plan'.

Great! What is it? 'The amount is shown on your post-sales information.'

So, Aviva has stated that, over time, I will be auto-enrolled into various apportionments of AvBAq Ovr15Yr CorBndITrS6, Av Divers Asset Fd 11 S6 and Av Deposit S6; it's told me how the charges might be applied, and that growth from low-risk 'lifestyling' funds may not cover the charges; but it apparently won't tell me what these charges are until I'm set to start contributing!

Four days after the policy features document, I received what I presume to be the post-sales package, containing fuller details of the funds and the charges.

Nevertheless, the initial communications - on which pension savers will attempt to decide whether to opt in or out of the scheme - left me pretty much in the dark. Hardly an effective way for a global company of Aviva's standing to go about building trust among pension investors.

Pensions auto-enrolment is generally a good thing. But despite all that's been said and done to press home the importance of saving for retirement, insurance companies have a long way to go before battered public confidence in private pension provision can improve.