Cavendish Online / AMC question

I'm not too bothered about which funds NU or another company invest in;

That is the most important bit.

I'm very risk averse and would be happy just saving cash to avoid any risk of losing money.

if you go with cash you are going to have to pay around 2-3 times more than you would need to if you went with a better fund spread. Your state retirement age is 68 and that gives you 43 years to invest over. Picking cash is extremely daft for the regular contributions. Not meaning to sound rude there but it really is not a good idea for that length of time.

What are execution cases?

That was a typo. It should have said execution only. Execution only is when you pick the provider and funds to invest in and no advice is given. In return for doing this, most IFAs will reduce the charges on the product as they have less paperwork to do and less liability (as you cannot complain to the FOS for example). That is what Cavendish are doing but they are only doing it on a limited product range and not whole of market. Some posters have approached them to use pension providers other than those on their website and they have refused.

To avoid all risk and to minimize commission paid to an IFA or to the pension company itself, my understanding from this site is that Cavendish Online is the way to go. Is that incorrect?

Yes. Martin's articles are out of date and not accurate. Indeed, the NU pension stakeholder referred to in the article on saving costs was withdrawn from new business February last year and replaced with a different one with different charges. If Martin was giving financial advice or was regulated by the FSA, he would be leaving himself open to being fined or facing some disciplinary action. Especially as this was pointed out to the board admin over 12 months ago.

It also makes the mistake of comparing commission with charges and with many of these mono charged pensions, there is no direct correlation. For example, an IFA could take around £1500 fee a multi charge pension at your age and still come in cheaper than a nil commission stakeholder.

For example, a 1% stakeholder with nil commission to reduce the AMC at £150pm would result in £378,000 at 7%. An IFA taking a £900 fee using same details would come in at £391,000. Thats £13k more despite the IFA being paid £900.

Now, if you were insistent on using cash, you wouldnt use the 7% figure. The 5% is closer but that comes out at £219,000. Personally, I would use an even lower figure to budget on.

I'm a bit confused with how it can still be better through an IFA (with them taking £900) than going through an execution only service with lower fees?

Thats because you are mixing up commission, fees and annual management charges and assuming that they are in someway directly linked.

Cavendish offer mono charged pensions on their website. Multi charge personal pensions can come in cheaper than mono charged pensions. Its a different way of taking the charges. You tend to find they get rid of most of the charge early on (usually in first 3-5 years or even straight away) and then leave you on a lower annual management charge than a mono charged pension.

Over the long run, a further 0.05%-0.1% off brings that discount. Most of the multi-charge pensions have fund based discounts favouring larger contributions.

So in the example above, what is the annual management charge? I haven't been able to find one cheaper than a stakeholder pension!?

The lowest it could go to was 0.3%. That one i think was 0.5% but it had access to external funds (which a stakeholder wont).

You wont find many multi-charge pensions on the web. They are designed to be used from the advice channel. The internet tends to focus on mono charged.

I've spoken to hargreaves who have informed me that there is no plan they can offer with such a lower percentage even if it was advisor based.

They should improve their research then. You have Clerical Medical, Scottish Equitable and Scot Life to name just three. Its possible that HL dont get the best terms with providers. They are a large IFA but thats mostly to do with their own platform. They may not be as strong negotiating terms with other providers. I know Cavendish are not as I and other advisers on the board have found that on like for like basis, we could beat their term.... if we wanted to.

Indeed, I have a Scot Life one on my desk right now which has a 0.7% equiv annual management charge but thats with me taking 0.5% for servicing. Without that the it would be 0.2% p.a.