Pension charges reduces small pension to zero

archy

Hello,

I am hoping someone might be able to offer some advice. I was advised to take out a pension back in 1998 by a financial adviser acting on behalf of a pension company (Allied Dunbar). I had paid into a pension for 9 months then had to stop it. I had paid in approx £450. I paid £25 and my employer paid £25. My financial adviser was paid £25 per month.

I am so disappointed to check and find out that this has now been reduced to zero as charges continued. I did not get advised when I had to stop my pension that this would happen. Reviewing my paperwork I did receive a letter telling me that there would be ‘unit charges’ but I did not realise that these would whittle the full amount away over the years and the pension adviser I only spoke to once yet he received £25 per month. I consider this to be a very poor service.

Can I complain about this? How would I go about this? Would I have a case to recoup some of the pension because of poor (non existent) advice?

I know it is not a huge sum but I would expect so more from an adviser.

Thanks you in advance.

dunstonh

Thanks for reposting it Archy. This way your thread will only contain your subject and not have mutliple conversations going on at once. That always ends up messy and the original posters questions can often get forgotten and unanswered.

the pension adviser I only spoke to once yet he received £25 per month. I consider this to be a very poor service.

No he hasnt. Allied Dunbar was a tied salesforce that closed down some years ago. he was only getting a payment whilst you were paying. When you stopped paying his would have stopped as well..

As the company doesnt exist and hasnt for some time its probably understandable that a pension you took out 10 years ago and only paid 9 months into hasnt had servicing.

Can I complain about this?

Based on what you have said, No.

Would I have a case to recoup some of the pension because of poor (non existent) advice?

Advice was given at point of sale. How much did you pay for that? Being AD, I am assuming you didnt pay for it but went with commission option instead. So, the cost of advice was taken from the product. That would have been fully disclosed at that time (take a look at the product illustration issued by the adviser at point of sale and again with the cancellation rights).

As you cancelled just 9 months in, the adviser wouldnt have got that bulk either so they not only didnt recover the cost of initial advice but also there was nothing to pay for ongoing advice.

I know it is not a huge sum but I would expect so more from an adviser.

You saw a tied insurance agent. However, that is irrelevent. The AD sales rep probably got around £150 for 4 or 5 hours work. No-one is going to consider that unfair. That also is irrelevent as the charges seem to be your main concern and the AD rep doesnt get those. AD did.

Before the introduction of stakeholder pensions in 2001, most pensions were priced on the basis of a high inflation, boom/bust economy with higher rates of tax relief (which actually involved quite a bit more work back then compared to now). So, any pre 2001 pension is often obsolete with higher charges and things like capital units were common place back then. Also, the bulk of the cost of advice was paid for out of the first 12-24 months of payments. It had been that way for decades on most classes of business. This is why it was always the case you were told never to cancel (or surrender in the case of other plans) in the early years as you would get back less than paid in and possibly nothing at all).

And that is your issue. You had a legacy product that was a sign of the times and didnt pay in long enough for it to obtain any real value that wouldnt be eroded by initial/capital units.

Modern contracts have an annual management charge where it isnt possible for the charges to erode the value down to zero like that. Yours was one of the last of the old breed. It wasnt until 1999 that you started to see stakeholder friendly charging structures and ironically, it was the ongoing reduction in charges that we saw that largely led to the closure of the big salesforces from the insurance companies as they no longer could operate with these lower charges.

archy

Thanks for you reply. I understand your points.

It would have been better if the AD sales rep had made it very clear at the start the charging structure. He didn’t verbally talk this through with me and yes I understand that it is in the literature but why could he not just talk proper figure – “I will get paid this £X, AD will take £X per month in charges, be warned that if you stop it then the charges will be £X – is that too much to ask, especially if he is getting paid £X. Instead he focused on the pension end product and selling in in terms of what I require for retirement. He has miss-led me, we can’t all be superb with numbers and dense agreements.

I can see exactly why the modern pensions are set up so this does not happen now. Obviously this was a big problem and restrictive for the consumer. There was clearly a rip off taking place.

dunstonh

It would have been better if the AD sales rep had made it very clear at the start the charging structure.

Absolutely. However, it was allied dunbar. Known as Allied Crowbar to those in the trade. They were probably amongst the least compliant and most sales orientated sales force out there. Very professional with presentation material (glossy and attractive bumpf) though and that suckered a lot of people in. The modern day equivalent is St James Place (indeed many AD sales reps went there).

Instead he focused on the pension end product and selling in in terms of what I require for retirement.

Standard sales patter.

There was clearly a rip off taking place.

More like a product of the times being sold by a salesperson and not a proper adviser (a common theme you will see on these forums where we generally push people to use real advisers and not sales reps using an adviser tag) , It also needs to be noted that whilst their early charges were heavy and their contribution charges are as well, their annual managment charges were nil. So, once you got past the initial charges period and started building up a value they could come in quite cheaper on paid up plans.