Moved pension - big fees

moneysavernottingham

Hi,

In 2007 a financial advisor told my mother and father that they should move thier Pru pension elsewhere. On his advice they did this.

He took £11k comission out of the pot for filling in a few forms and seems to be drawing 4.1% pa commision. Is this really normal practice? No wonder he was driving a 911 Turbo...

Where do they stand? It all seemed rather rushed through at the time.

Any comments / advice?

MikeJones_2

Hi moneysavernottingham,

Can't really tell from the information that you've posted so can I start by teasing out several questions (and other posters will come along with their's too):

1) What old are your parents (now)?
2) How big were each of the pension pots?
3) What type of pension policies did they have with the Pru?
4) What type of policies do they have now (and with whom)
5) Do your parents have a list of the recommendations made by the adviser at the time (often referred to as a Reasons Why Letter)?
6) When do they intend to retire?
7) What fund types were they invested in before the transfers (and now)?

That's a start.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

project500

I don’t think financial advisors get money for taking money out of a pension fund (hopefully) just placing the money in a new situation.
I moved from the pru at a similar time and as far as I was aware no commission is paid on money coming out.?

EdInvestor

It's the same money whether coming in or going out.All commission will eventually be deducted from your fund - along with other charges - even if it isn;t taken upfront..

moneysavernottingham

My concern is that after the transfer the fund would not have time to recover before retirement especially given the yearly commission. It seems they would have been better leaving it where it was. I do not understand how changing the pension provider at that late stage would benefit them.

1) What old are your parents (now)?
Mum 67, Dad 70

2) How big were each of the pension pots?
Combined Q1 2007 - £250K
Combined Q2 2009 - £150K

3) What type of pension policies did they have with the Pru?
Will find out.

4) What type of policies do they have now (and with whom)
Winterthur

5) Do your parents have a list of the recommendations made by the adviser at the time (often referred to as a Reasons Why Letter)?
Will find out.

6) When do they intend to retire?
2014/15

7) What fund types were they invested in before the transfers (and now)?
Will find out.

MikeJones_2

Hi moneysavingnottighman,

Some interesting replies to the questions I asked. I'll await the other answers before I comment more, but can you ask your parents what they specifically discussed with the adviser in terms of their 'attitude to risk' when they received the advice.

This may have been reitereated in the 'Reasons Why letter'.

Indeed many advisers give their clients a copy of the Fact Find which was completed at the time of the advice (thus both parties have a record of the various answers posed to assist the advice process).

Do your parents have a copy of the Fact Find?

At this point of your post I'd just like to add that I am by no means finger-pointing at anyone (your parents or the adviser). Simply teasing out some issues before any meaningful comment can be made.

By the way, I can't ever recall seeing an 'annual commission' of the figure you have quoted on a single premium transfer/fund. Are you sure this is correct?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

whiteflag_3

moneysavingnottighman,

fyi- Winterthur have a section on their application which lays out exactly what commission is being taken by the adviser, and clients have to sign to say its been explained and understood.

Therefore your parents should have been made aware of all the commissions before they commited to anything.

smerch1468

whiteflag wrote: »

moneysavingnottighman,

fyi- Winterthur have a section on their application which lays out exactly what commission is being taken by the adviser, and clients have to sign to say its been explained and understood.

Therefore your parents should have been made aware of all the commissions before they commited to anything.

It is also their advisers responsibility to disclose any commission payments he/his company receive on the reasons why letter and the charges that will apply to the new pension plan.

dunstonh

It is also their advisers responsibility to disclose any commission payments he/his company receive on the reasons why letter and the charges that will apply to the new pension plan.

Its not required on the suitability report. Although what you should find is that the charges of the product should be disclosed on the suitability report when it isnt a stakeholder pension and the differences between that pension and a stakeholder.

There actually appears to be no mention on this thread so far of the charges. Just the commission. With a pension you pay the charges. You dont pay the commission. The product provider pays the commission. Some contracts can equalise the two but its still the charges you look at.

4.1% p.a. being paid to the adviser is almost certainly wrong. Where there is a trail payment it is more typically 0.5% and factored into the annual management charges. An adviser has no chance of justifying 4.1% and I doubt there are any providers that would actually allow a figure that high. If there are regular contributions, then 4.1% could be the commission paid against those.

He took £11k comission out of the pot for filling in a few forms

Its a bit more than filling in a few forms. There has to be a cost analysis and you are paying for the advice. £11k is very high but if they chose to use a commission adviser and not pay on fee basis, then that is their choice to make at this time. The recommendation has to be valid as well. You cant just transfer a pension willy nilly. You have to have a good reason to. Saving charges is a common reason as many older contracts are not as cost efficient as modern ones. It is possible to beat Pru's charges on many of their pension contracts. Some of Pru's contracts dont allow access to unit linked funds and if your parents wanted a greater investment selection than with profits then that could be another reason.

whiteflag_3

jem16 wrote: »

Boys - can I make a wee suggestion please?

If you disagree with each other can you just say - "I disagree with dh/whiteflag because I think/feel ..........."

It would make much better reading than the antagonistic comments of late.

Nae bother Jem.

I disagree with dh because I think the OP specifically said the adviser took commission from the Winterthur Plan set up in 2007, yet dh said the commission comes out of the charges.

The product provider pays the commission. Some contracts can equalise the two but its still the charges you look at.

While this may be the case with other pensions, the Winterthur pension has since 2005 been "factory gate priced" , which means in this case the parents of the OP paid the commission, not the pension provider. The base charges are the same for all Winterthur investors.

Any commissions are funded by the investor not the pension company with Winterthur, therefore for this thread I felt it was important to highlight the fact, given the OP had mentioned the fairly hefty up front "commission".

dunstonh

I disagree with dh because I think the OP specifically said the adviser took commission from the Winterthur Plan set up in 2007, yet dh said the commission comes out of the charges.

If the commission did not come out of the charges then where did it come from?

Any commissions are funded by the investor not the pension company with Winterthur, therefore for this thread I felt it was important to highlight the fact, given the OP had mentioned the fairly hefty up front "commission".

Exactly, the commission is funded out the product charges. Factory gate priced contracts which equalise the initial commission and initial charge still use the commission system to pay the remuneration. A 3% commission would be a 3% charge and that would show on the personal illustration under the charges section.

There has still been no clarification on the overall charges on the contract though. The OP thinks the IFA is taking 4.1% p.a. on the value but you know as well as me that it is not likely. So, the charges need to be looked at.