Excessive charges and pensions advice.

[breamster]

Ok - just a quicky.

I have collected a number of works pensions over the years.

The FA giving me advice has recommended I transfer most of them to my current works pension.

1) For this service and advice his charges will be 3% of the fund value. A few £K. Is this a fair charge? Seems bloody high to me but is this typical?

2) Should I be consolidating them to my current works pension? I've no idea if I will be working here 2 years or 20 years to be honest? What other options should I consider?

I am mid thirties if that makes a difference.

Thanks in advance!

[ellroy]

Not enough info to make the call, but 3% could be high depending on the amount and complexity.

[Simpo Two]

I had three different pensions combined and moved to a new provider for 0.5%. Mind you it was part of a bigger job so I got a lower rate. I think they normally charge 0.75%.

[breamster]

Thanks for the feedback.

I've done a little more background research and he is obviously taking the mickey.

I've just notified him that his services are no longer required!

Thanks all.

[The Leaper]

If your current works pension is sponsored by your employer why not speak to them and get them to assist you with organising all the transfers? You seem to be willing to make all the transfers based on the IFA's advice, so you could process everything yourself and with your employer's help. This would be "fee free".

R.

[breamster]

The Leaper said:

If your current works pension is sponsored by your employer why not speak to them and get them to assist you with organising all the transfers? You seem to be willing to make all the transfers based on the IFA's advice, so you could process everything yourself and with your employer's help. This would be "fee free".

R.

He was recommended through work. I'll do it myself I think- it doesn't look too hard.

[pacoryan]

the 3% is the cost of advice, i.e. the IFA laying their neck on the line for the next 40 yrs that this is a good idea. To do this they will have undertaken projection comparisons probably using proprietary software that they have paid for, for each of your schemes. They will also factor in any penalties applicable to transfers, changes in Death Benefits, any guaranteed benefits that might be lost including minimum returns on With Profits funds or Guaranteed Pension benefits as well as the financial security of the respective schemes. They have probably undertaken a risk analysis and will also devise an appropriate investment strategy.

They are presumably recommending you transfer in to your current work scheme because it is very cheap, and the transfer makes sense in the long run with the cost of his advice factored in.

Thus your 3% buys this research, the liability for the advice, at least two meetings and means you don't have to do all this yourself. 3% isn't unusual for average size scheme transfers under advice.

Or you could do it yourself, save a couple of % and hope you made the right decision. Don't get me wrong, for the financially informed this is realistic. A lot of my clients would rather pay 2 or 3% and not have the bother.

ETA Slight Fail on the part of the IFA to give the advice without agreeing the fee first! If you had been to see me you would get one bill for the recommendation, and another one for carrying it out!

Edited by pacoryan on Tuesday 26th November 13:23

[Ginge R]

Paco,

Is this the 'cheapest is best' mistake though? Just as many clients are in SIPPs which are not appropriate because they are needlessly complex, overly functional and costly, are some clients in a particular pension over another simply because it is cheap? I suspect we both know that the Regulator likes 'cheap' as much as anything because it is the one thing etched in stone, the known quantifiable factor that it can look at objectively, whereas (on the other hand) any additional pension scheme functionality which might cost more, but which might also be more suitable can be harder for it to adjudicate on in the event of a complaint/dispute.. because it is subjective.

Edited by Ginge R on Tuesday 26th November 14:27

[pacoryan]

Ginge R said:

Paco,

Is this the 'cheapest is best' mistake though? Just as many clients are in SIPPs which are not appropriate because they are needlessly complex, overly functional and costly, are some clients in a particular pension over another simply because it is cheap? I suspect we both know that the Regulator likes 'cheap' as much as anything because it is the one thing etched in stone, the known quantifiable factor that it can look at objectively, whereas (on the other hand) any additional pension scheme functionality which might cost more, but which might also be more suitable can be harder for it to adjudicate on in the event of a complaint/dispute.. because it is subjective.

Edited by Ginge R on Tuesday 26th November 14:27

I couldn't agree more. There are very few employer's GPP schemes that have crossed my deck that I would recommend, often with apparently "cheap" charges frequently nixed by the use of mirrored funds that the investor has absolutely no clue about.

And then you change jobs but as that employer is no longer contributing up go the fees as well, so you need another transfer!

I love the idea that IFA's just say "hmm you want to move Pension A to Pension B? Ok that'll cost two grand, I'll send you the forms....". There is a little more to it.

Small pots are always a problem of course, the cost of advice makes transfer work uneconomic pretty quickly.

[Ginge R]

What is annoying is that usually, the scheme is a grotty stakeholder one (still) - the 'price cap' has become a 'price floor'. Why company finance directors don't do something about it is beyond my comprehension. Even worse, the prospect of being in your 40s/50s and blissfully unaware of your plight, stuck in NEST.

[westberks]

all too often I have this conversation with clients.

if you have the financial knowledge, time and luck, then by all means go it alone with the transfer. But for 3% on a 100k fund that has been collected from 3 or 4 old funds there is an absolute pile of work involved just to get the transfer actioned and approved.

fund charges are another area where you can buy a basket of trackers for next to nothing, and if that works for you then great. but to expect a portfolio of Alpha managers within the charging structure of stakeholder or NEST is being a little bit hopeful.

the Alphas may still make a mess of it but at least they've been doing some work whilst they do!