Upfront charges on stakeholder - what happened to me ...

citizenclive

See below extract from email to my boss about me being forced to join yet another third money purchase scheme and the mad admin charge of £1,414.

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Dear Boss,

Thanks very much for raising this matter with *****.

I will have to join the company group scheme via Towry Law and provided by Standard Life. However, pension schemes with Norwich Union, Scottish Widows etc can be set up for as little as £25.

This puts the Towry Law admin charge of £1,414 in its true perspective. In spite of this fee, Towry Law refused to advise me on asset allocation - if you want help with that it will cost you even more money.

Our co. secretary said that if companies provided help in this context they would be open to accusations of pension mis-selling but where stakeholder products and tied agents are concerned this can't happen. He nominates a health and safety person, he would simply have to nominate someone in accounts to explain to staff how to fill out the form. The £1,414 Towry Law option should be a last resort open to those who don't have accounts staff to help them complete a simple form. eg. accounts lady comes in once per month.

If company secretaries & UK directors are turning a blind eye to payments like this, it is no wonder there is a pension crisis in the UK. A pension contribution of £1,000 invested at outset could be worth £10,000 or more to someone's pension fund in 20 year's time.

Because most people in their 20s and 30s change jobs every 2-3 years the major beneficiaries of schemes like this will be introducers and agents like Towry Law. I discussed these fees with someone at Standard Life, the actual provider of the pension fund, he agreed saying he was in the wrong job !

dunstonh

Towry law are not known for the cheap pricing. However, if you pay by fees on a stakeholder pension, it could cost a lot more than going down the commission option route. If you have a long time to go until retirement though, the upfront fee could be cheaper because it will result in lower annual management charges. There is nothing wrong with being charged a fee for although in this case it seems very high where no fund recommendations are being made.

Our co. secretary said that if companies provided help in this context they would be open to accusations of pension mis-selling but where stakeholder products and tied agents are concerned this can't happen.

She is partly right. The product has nothing to do with it but tied agents are not allowed to recommend investment funds. However, IFAs do have to recommend investment funds and have the research to support those recommendations. Last I heard Towry Law were IFAs and not tied agents.

I discussed these fees with someone at Standard Life, the actual provider of the pension fund, he agreed saying he was in the wrong job !

Someone sitting on a rolling 3 month contract in a call centre with limited perks would find any job better than what they are doing

Standard Life have been doing a number of things recently to irritate IFAs and they need to be careful as the bulk of their business comes from them. Best not to bite the hand that feeds you.

I think the biggest issue here is that the company has chosen a big IFA firm which deals with big companies and big schemes. They charge because they know people will pay it. You dont say what the size of the company is or how many employees there are but many local IFAs can handle small companies (upto 250 employees) much cheaper. Most companies dont mind the IFA earning from it because they do not have to pay a member of staff to do the admin.

EdInvestor

Standard Life have been doing a number of things recently to irritate IFAs and they need to be careful as the bulk of their business comes from them. Best not to bite the hand that feeds you.

Standard Life has given up doing unprofitable business such as personal and corporate pensions like this , which only benefits advisors and introducers.

I suspect we will find that other life companies will take the same view soon, as they are not making any money out of this so called "new business" either. It is just the same money being recycled round from insurer to insurer, earning new commission for each transfer.The recent Ned Cazalet report on the issue spells out the problem quite clearly.