IFA costs to arrange pension

[Deleted User] · 24 February 2006 at 6:57PM

I need to know the average real cost of arranging a large lump sum pension transfer to a sipp ie IFA costs and not sipp centre costs etc

would you say that a max of 3% of the amount invested plus 0.5% of the fund value each year is an average figure for IFAs

Pension is sitting very nicely in a stakeholder at the moment, capped at 1%

Retirement and income drawdown is looming

dunstonh · 24 February 2006 at 7:10PM

would you say that a max of 3% of the amount invested plus 0.5% of the fund value each year is an average figure for IFAs

According to FSA, 2.8% plus 0.5% is the average rate. 4.6% plus 0.5% closer to the maximum but that is with limited providers. Get them to 2.8% plus 0.5%p.a. as per the average which should be quoted on their IDD/Menu document and you should be happy. Get them lower, and you should be happier still

Remember an average means there are cheaper but there are more expensive.

[Deleted User] · 24 February 2006 at 7:21PM

Thank you dunstonh, I hoped you would reply

I am stock market savvy and am very tempted to arrange my husbands pension via sippdeal. I already look after mine

EdInvestor · 24 February 2006 at 7:24PM

It doesn't cost you anything if you do it yourself.Why pay 3% of your fund?

Setting up the drawdown itself is easy.

The most important thing is working out how you plan to invest the money.

Had any thoughts on that yet?

[Deleted User] · 24 February 2006 at 10:22PM

Ed I am going to study the funds offered by sippdeal plus I am bearing in mind the reits available in 2007
The funds in the stakeholder at the moment are:
pension protector
property
newton managed
The stakeholder is scottish widows. The fund has gone up on a month on month basis since start last year

EdInvestor · 25 February 2006 at 10:19AM

Kittie

I run my drawdown through Sippdeal, they are very cheap and the service is excellent.I use offshore property trusts ( yield 5.5-6.5%) run by the big insurers for my property component and a diversified High Yield Portfolio of shares which provided overall divi income of c. 5% p.a for my equities. I don't bother with bonds and gilts but keep a cash component.

I do recommend the equity income concept (in the fund universe Invesco Perpetual Income/Higher Income or the pension equivalent would be my choice).

The key to making drawdown work IMHO is to clearly separate the income and the capital growth so you know exactly how much of the capital you are withdrawing if you take the maximum income ( in my case I reinvest what I don't use of this in an ISA so it's completely out of the tax picture.) Thus you can adjust for good and bad times without it being a shock, and you shouldn't face an income decline.

The advantage to doing equity income via an HYP is that once the shares are bought you pay no charges.Paying as few charges as possible is IMHO another key safety factor with drawdown.

I am so far achieving a rising fund and a rising income, so it works for me. Mind you markets have been good to me in the past 3 years. But in any case my income would not be threatened if markets wobbled badly: which is an important advantage of the equity income approach - dividends are pretty stable, more so than cash.

[Deleted User] · 25 February 2006 at 10:49AM

Thank you Ed. I needed some objectivity.

PIBs and REITS are other options I want to research. I need to be fully informed before our next meeting with out IFA in a week or so. I cannot see that the IFA is the fount of all knowledge about funds and stocks etc our IFA uses sipp centre and a stockbroker (I don`t know the company yet)

I do believe that I can choose well. I am fully able to read stock charts etc but I may need advice re pension structure.

dunstonh · 25 February 2006 at 11:05AM

EdInvestor wrote:

It doesn't cost you anything if you do it yourself.Why pay 3% of your fund?

Setting up the drawdown itself is easy.

The most important thing is working out how you plan to invest the money.

Had any thoughts on that yet?

Drawdown is an extremely high risk transaction. For those that don't have the knowledge and experience of running drawdown portfolios, they can do far more damage than good. Paying for advice at just 3% plus 0.5% (remember the 0.5% is normal across the cheap providers as well) could be very good value for money. You could get it cheaper.

If you think you can do better and are aware of the pitfalls, then fine, do it yourself. However, dont be put off by paying for advice. Remember if you do use SIPPdeal or HL, for example, they are making 0.5%p.a. for no advice or liability. You could go to a local IFA, set it up through them on execution only/direct basis and pay no initial commission. The IFA then gets the 0.5% ongoing to give you a review/report.

EdInvestor · 25 February 2006 at 4:14PM

Sippdeal has no annual management fee (how often do I have to say this?) :rolleyes:

Much of the risk in drawdown is caused by paying fees, whether to IFAs, Sipp providers, or fund managers.If you can remove the charges from the equation, the risk level is reduced a lot.

These people are quite often taking as much as half the income, forcing the investor to drawdown more than necessary from the capital, which is where the risk lies.

Sorry chaps, but that's a fact.

.

dunstonh · 25 February 2006 at 5:23PM

Much of the risk in drawdown is caused by paying fees, whether to IFAs, Sipp providers, or fund managers.If you can remove the charges from the equation, the risk level is reduced a lot.

Rubbish

Sippdeal has no annual management fee (how often do I have to say this?) :rolleyes:

One again we repeat that you are misleading people when talking about funds. There may be no charge on the wrapper (like many SIPPs now or coming out soon) but the charge is on the funds within them. SIPPdeal make 0.5% p.a. on the funds. What are they giving for the 0.5%?

Sorry chaps, but that's a fact.

No its not. If it takes 2.8% (using the average) as a one off charge to set it up and the only ongoing charges are 0.5%p.a. which are present if you do it yourself, then that 2.8% at the start is going to have very little impact over a 10-15 year period.

EdInvestor · 25 February 2006 at 5:33PM

You insist on assuming that people always use funds.Actually in Sipps, especially the execution-only ones IFAs aren't involved in (so how would you know?) they don't.

They do indeed buy PIBs,gilts, and shares and keep some money in cash and once purchased , on these they pay no annual charges and nor do they pay any charges on their SIPP except 75 quid every five years for a valuation of their fund and a fee for sending the drawdown income (I pay 11 quid a year).

What a total waste of 2,800/3000 quid out of the average 100k drawdown fund to set it up when all you have to do is write a couple of letters.I kid you not, setting up a drawdown is a great deal easier than making an endowment misselling complaint, that everyone is always being urged to DIY.

And DIY will also avoid the danger of being sold an investment bond for the tax-free cash lump sum, always an occupational hazard of taking your pension, unfortunately.

IFA costs to arrange pension

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