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Is 5% the norm for IFAs moving your pension?(13 Posts)
Wondered if anyone has been through this recently.
I have been seeing an IFA about my pensions. I have a couple of old stakeholder schemes from previous jobs that I am aware are just sitting there. I now freelance so want a scheme where I can easily deposit variable amounts into.
As is the way they have suggested moving everything to a new scheme, which does have the added bonus of an online portal.
I am willing to pay to have my money managed, as I think that could (although not a given I know) help improve the performance.
However, just reviewing the proposal doc and the commission fee to the IFA is 5% of the pension value plus on-going charges. I know they have to make their money, but I just wanted to see what other IFAs have charged.
The last time I transferred funds from an old pension into a new one there was an admin charge for the transferral, ongoing management charges for the new pension provider, and I seem to remember it took a long time to complete. I did not pay a fee to an adviser because I went direct to my preferred pension provider. 5% (of the balance?) paid as commission to an IFA sounds excessive. Can't you transfer your pension yourself?
Thanks Cogito for the reply.
I find money issues diffcult/a pain, so some of this is about me choosing to outsource. I know I should be able to manage it myself, but I just cannot face it.
I like the idea of ongoing management of my money from an IFA, rather than just leaving it in the schemes it is in with nobody actively managing it. When I worked in the companies where I aquired the pensions there were IFAs there but now I have left they are just sitting there.
And the deal with this particular IFA is that to gain the ongoing management, I need to pay. Although I could choose NOT to move my other pensions (therefore not paying the 5%) into my new one, but I guess then I wouldn't be attractive enough as a client for them to bother with me as the new pension will have such little money in it.
It is 5% of the value of the pension, which a few £0000s as I have an ok pot of money. The money will be taken from the pension pot, so it isn't something I need to pay upfront. I guess the idea being that I will make a better return from my pension longer term, hence it is worth moving.
I have moved pensions before, but cannot remember what the commission was.
I may be wrong but, once your pension is invested in a fund(s) with your pension provider with the online portal etc, your IFA won't be actively managing it at all will they? I would have thought it'll be the pension provider's fund manager that is making the decisions.
You see, mine is with one particular provider. I have the money split across a few funds and, every so often, we review performance and I might change the distribution. It would only be if I was to change pension provider completely that I'd consider getting independent financial advice.
What will your IFA be doing for their ongoing fee?
I thought the whole point of a stakeholder was that you don't have to pay to have it advised upon and indeed that you don't particularly need to do anything with it at all because it's not like the old pension schemes which you couldn't leave alone because the charges would slowly wipe-out your investment. With a stakeholder you can just leave it where it is and if you want a more active strategy on the funds in that stakeholder then you can apply those to the stakeholder as it is now - you don't have to move it and if you want to move it for simplicity you certainly shouldn't pay 5% to move it.
If you want a more active pension management strategy on future pension payments then yes you might need to pay for advice on an ongoing basis but it's highly unlikely that this will result in a better result, after fees (especially the fees you mention) than just going with the default option.
The point is (although I am feeling less convinced having seen your responses) that the IFA will be advising on the funds that the pension (ie the new combined one) is invested in. I know I could do this investigation myself, but I don't know enough about the markets. I want it reviewed each year etc.
There is part of me that wants it all in one place too. The IFA has an online platform, my current providers only offer annual printed statements.
I think I need to rethink!
Thanks again for your comments.
I am looking at transferrring an old fund (which essentially charges me about 10% of contributions), the transfer value of which is about £10k into my current employer's pension. It seems to be very complicated (I was told I needed an IFA to confirm this is the right thing to do...and that would cost about £400-£1000 as they would need to review my financial situation) and I am currently talking to new provider to see if I can sign some sort of disclaimer. As far as I know, there would be no other charge to pay.
I would seriously talk to another IFA. If your current one has an online platform and is offering to invest your pension fund themselves then they don't sound especially independent. They sound like they have their own product that they are selling.
Advice from a good IFA on the funds you're invested in is worth paying for. 5% does seem steep but it's dependant on the value of the fund you're moving. I work for an IFA and our minimum for carrying out this type of exercise would be in the region of £750. Ongoing advice thereafter probably around 0.5% with annual reviews carried out to ensure funds are still performing well, you're comfortable with the level of risk etc.
If the IFA is receiving an ongoing fee from your plan, they are now legally obliged to provide a service for this.
Also does your IFA have their own platform or do you mean they are recommending a platform? Different things.
And you will have the option of paying the fee yourself, rather than taking it from the pension pot.
3% is our usual fee, unless your pots are very small or they are held in occupational money purchase schemes. However we have minimum charges as the work to justify a transfer would be too great if you only had say £5k in both pots.
On going charges would entitle you some level of service. They won't actively manage your money, but they will undertake asset allocation and review performance. Housekeeping is essential for long term investments, either by you or someone that is knowledgeable.
One point is though, do they need moving at all? What is the upside benefit of the new provider?
... not sure I'm totally happy this sounds like great value.
Thanks for the later comments.
The platform isn't theirs, my mistake.
Pot is worth £70K, so the 5% is = £3,500. It just looks a lot of money written down. And ironically it matches the amount one of my schemes rose this year.
What is worrying is that I realised that some of the figures given didn't make sense (eg the suggested annual pension after taking the cash free lump sum was higher than the pre cash free lump sum pension), so basically the illustration in the report was riddled with errors. I have questioned him and he has confirmed that mistakes were made. Doesn't instil confidence.
I am not sure the report convinces me that I should be moving. I think it would be better for me to pay somebody to review the funds I am invested in, in my stakeholder pensions and leave them there. I guess an IFA would do that on an hourly rate?
Just to add a bit more info, as a qualified IFA.
in your circumstances we would charge approx 1.5% initial charge ie approx £1,000. The reason for this is that once our regulatory fees, professional indemnity, office costs etc are paid there is appox £500 to cover 8-10 hours work. This cost cover an initial longterm goal plan where the client gets to work out what they are trying to achieve and we show them how they may get to their goal.
the initial fee can be paid by cheque or from the plan. If the advice is pension advice and the client wants to pay by cheque then usually we advise that they pay £1000 in to the pension and they would get at least 20% tax relief making the cost cheaper
we then charge 1% pa as an ongoing fee and offer the choice of either a platform where we offer whole of market investments.we make the choice of funds after discussing your risk assessment OR we offer full discetionary management through our DFM funds. our annual costs are about 0.5% pa in total more than an insurance company. The 0.5% gets you professional advice incl prof indemnity if anything goes wrong.
annually we review our clients longterm goals make sure that the plan and risk is all within tolerances that were set 12 months earlier. we have a long list of annual benefits that our clients have access to.
I would shop around or ask your adviser why they think £3,500 is acceptable.
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