Pension advice

[Pensionconcerns]

So dh and I are at a stage where we feel we need pension advice and we have been recommended an advisor.

Dh has a defined contribution pension fund of about £400k, we're thinking of moving it to make it pay out to me equally if he dies first. And we are also trying to find tax efficient way to build my pension - which is miniscule, we are running our own business so building my pension seems like a good way to save on tax and give me security.

So we had a free phone meeting with a financial advisor who told us he charges between 1.3 - 1.5% for advice on product we take out with him - that would mean £6000 for moving dh's pension - not sure what it means for the advice he'd give us on building mine - we might need a tax accountant to advise us on company tax law? And then he suggested managing our funds at approx 1.5% of their value on an annual basis.

Sounds a bit pricey to us, not sure he could add 1.5% of value annually to our investments, hard to know - we mostly have trackers with low management rates.
Have you used a financial advisor and do you think they saved you more that their fees?

We mostly use self-invested pensions and 1.5% does sound steep so I’d shop around.

I found this book useful:

www.amazon.co.uk/Guide-Saving-Investing-Retirement-definitive-ebook/dp/B01GRQV2Z2?tag=mumsnetforu03-21

What rates of tax are you both on? Are you in England or elsewhere?

TBH, I'd have thought any Financial Advisor will charge similar.

Have a look at Moneybox too.

1.5% is very reasonable for a DB transfer. There are lots of costs (reports, analysis etc to run). Plus the liability and risk is significant.

Transferring solely on death benefits alone would not be sufficient justification on the face of it.

What rates of tax are you both on? Are you in England or elsewhere?
Dh takes a small salary a month and the rest in dividends - his pension has hit the life-time allowance. I am on basic tax rate and receive dividends too currently I pay my whole salary into my pension.

@ fromdownwestPlus the liability and risk is significant. Is this for us or the financial advisor?

I get that financial advisors may charge similar but is it worth it - will they save us £6K a year?

edit fail

@fromdownwest "Plus the liability and risk is significant" Is this for us or the financial advisor?

Sorry, reading whilst doing something else! It is a DC not a DB, ignore my points.

Where is it now?
Why are you looking to move it?
Could you not complete a nominated beneficiary form with the current provider to establish the death payout?

How has he hit the LTA?

Does he have another pension?

Yes he has a couple of defined benefit pensions. I have very little as I have been a SAHM up till last year, and have been thinking I am exposed from a pension pov, so we are looking for ways to make me more secure in the event he dies first. A colleague transferred his pension to a fund that would pay less while both partners were living but pay more (relatively speaking when one died).

@fromdownwest I would only get 50% of his pension if he died and I would need closer to 66% to retain the same standard of living.

If it is a DC fund then you would receive the full value of the fund, unless it is was used to purchase an annuity.

A 'collegue' transferred it? Was this person qualified to do so?

The LTA is currently £1,055,000. Less £400,000 DC gives DB pensions valued at £655,000. The multiplier for valuing against the LTA is 20, so he must be expecting an annual income from DB pensions of £32,750 pa.

It is suggested that a 4% pa withdrawal from DC funds in drawdown is the maximum sustainable rate, which would put him on £16,000 pa. A combined income therefore of £48,750 pa while your husband lives.

When he dies, DB pensions generally pay out 50% spouses pensions, and the unused DC funds would be transferred to you. You could expect your income to be £32,375 pa.

Hopefully you will be comfortable enough. Make sure you take maximum tax free cash.

Also, get 'paid' a larger wage from your company - take home £12,500 to stay within your tax allowance, and commit the rest (up to the £40,000 annual allowance) to your own pension

Nice overview Krieger - However, there is pre oand post A day considerations, enhanced protection etc..

So I would personally say 1.5% to undertake a review of all of your DB schemes, your LTA and ongoing advice is money well spent.

You are not looking to out perform the advised fund by 1.5% you are also receiving ongoing advice with regards to address your husbands LTA issues.

Quite right @fromdownwest

It is definately worth seeing an adviser. The need to transfer anything doesn't immediately strike me, but ploughing £40,000 of your companies profits directly into your own pension seems a good idea. Of course, it depends what your dividend income is - If your total income is over £110,000 pa, then the Annual Allowance will start to taper off...

You are not looking to out perform the advised fund by 1.5% you are also receiving ongoing advice with regards to address your husbands LTA issues.
Dh believes he has already addressed his LTA issues he took out the fixed protection on his pension in 2016 for a max of £1.25m. I think we need current advice and that might be worth £6000 - (still feels like a lot) to get it right but I don't understand why we'd need this annually.

You could move it yourself to a SIPP if you wanted to, for no initial fee and £10 a month charges.

You can have a consultation on a fixed fee if you want. There are advantages to a consultation where the advisor's income is not affected by the advice he gives. Will he have an incentive to guide you down a route that puts thousands of pounds in his pocket?

Ongoing fees will erode the growth of your fund shockingly.

Ongoing fees will erode the growth of your fund shockingly. That is my concern. Fees are taken off the investment - you don't really notice what you never had.

Were it me, I would pay for some advice on the best way to 'structure' your retirement funds - but don't be sucked into paying commission each year for 'advice'. I simply can't see how it is worth it. If you want DC funds in drawdown, assess your own appetite for risk and invest accordingly. A look through the finance/money section of the Sunday papers will help you choose investment funds / SIPPs etc.

An ongoing advice service is offered primarily so that your affairs are being regularly reviewed and that continued suitability of the underlying investments selected and recommended by the adviser continue to fit your objectives and attitude to risk.

It is not compulsory for you to take up this service and it can be cancelled by you at any time, but with the acceptance by you that the adviser then takes no further responsibility for the continued suitability.

For many people with straightforward financial affairs then a fee-based review every few years may well be sufficient level of service. Where there are more complex things going on an annual review can be a very good idea as usually also includes unfettered access to the adviser in between times too.

but don't be sucked into paying commission each year for 'advice'. I simply can't see how it is worth it. And yet when we questioned the need, the IFA said it's often the most valuable part of service - I was left wondering for whom. I have spoken to the Pension Advisory Service who were very helpful but they said they cannot advise on Company Tax issues, I did wonder whether we needed a tax accountant instead or as well as an IFA.

Also doing a bit of further reading on this forum and read quite a few warnings to stay well clear of advisors from St James's Place - why is that?

Deemed to be expensive, however when I have compared my parents pension with St. James’s place versus when they were with the Prudential with an IFA, the charges are less.

The adviser reduced his initial charge and his ongoing was half that of the IFA. Total costs when taking into account what they were paying the IFA, the platform and Prudnetial, it was about .6 cheaper with at james place.

I’m not an adviser, so I don’t want the responsibility of my parents affairs. They are their adviser twice a year, and never saw the IFA. So I think it’s horses for courses, if you are comfortable to self manage the fund and the tax etc then that would be your cheapest route

St James Place will only advise you on their own products and invest your money in their own funds (some of which have had rather poor performance). Their charges for these are relatively high, as are their initial advice and ongoing advice fees. And despite the industry-wide ban on exit penalties, they continue to get away with levying a 6-year exit charge on your investments, of up to 6% if you disinvest within the first year. Perhaps not the worst problem if you are investing over a long period of time, but it also applies to any additional contributions made, not just the first ones, and they are somewhat opaque about this fact.

There's a lot of money in pensions, and anyone who can get their hands on a percentage of it can make a handsome living.

www.ft.com/content/18494748-3ebc-11ea-b232-000f4477fbca