Personal pension charges?

atw_uss

I recently opened up a personal pension (AXA) through a Barclays financial adviser. I was happy to use their advice, and I was assured there were no additional charges over and above the 0.7% standard charges as detailed in the plan. The adviser also recommended one of the pensions I had already shortlisted.

I have just had the paperwork through from the pension company. In this, they list the commission chage at 0.7% which is fine and expected. However, they then state that they will pay my adviser £600 for arranging the plan and that this amount will be paid out of deductions from my plan. They also state that "we make a charge to cover the cost of commission paid to your adviser. We do this by taking away units each month for the next two years".

My question is whether I will actually be paying more for this plan because I have an adviser, or whether this £600 fee will simply be deducted from the company's commission, thereby lowering what they take ... In other words, I am not sure if I pay 0.7% regardeless of whether I have an adviser or not. Does having an adviser simply reduce the pension company's cut? It really isn't clear from the wording, which I have read several times.

Is there anyone who can clear this up for me? Thanks!

dunstonh

In this, they list the commission chage at 0.7%

That is high for commission. Its more in line with the full product charges.

My question is whether I will actually be paying more for this plan because I have an adviser

Yes.

or whether this £600 fee will simply be deducted from the company's commission

The £600 is not paid explicitly. That is what AXA pay barclays. However, the annual management charges factor that charge into the product. Depending on the product version, you can have that taken in different ways.

Does having an adviser simply reduce the pension company's cut?

The product provider receives the same whether you use an adviser or not. The advisers remuneration, if paid under commission, will increase the product charges.

However, 0.7% annual charge (assuming it is the annual charge you refer to and not a commission on top of the annual charge) is good for an advised case.

A nil commission stakeholder can be around 0.6%.

atw_uss

Thanks for the reply.

I think I said commission charge but meant annual charge!

In the "What are the charges?" section, it states that the charges cover commission, expenses, profit and other adjustments. Charges are quoted as 0.7% annually.

Below that there is a section called "monthly set-up charge". "We make a charge to cover the cost of the commission paid to your adviser. We do this by taking away units each month for the next two years. We will deduct £25 each month".

It then states that deductions cover commission, expenses, charges and other adjustments.

A final section is on "how much will your advice cost?"
"We will pay your adviser for arranging this plan. We will pay £600 straight away. The amount will be paid out of deductions from your plan".

What I find unclear - and I've read this a number of times - is whether the 0.7% annual charge will cover the adviser fees, or whether the adviser payment is over and above these fees - incurring additional deductions. I don't mind paying for a service so long as I am aware of it. I specifically asked whether there would be any additional charges and was assured the setting up was a service Barclays provides to its customers. In this case, if I need to pay a fee, I would far rather pay it to someone totally independent.

Does this seem clear to you? I will call AXA and also Barclays on Monday, but Ifind the wording of the document from AXA far from clear.

yelf

The 0.7% will cover the charges. But whats the problem: the guy has probably worked and trained for years to get to the level of expertise to provide you with such advice. Where's the issue?

atw_uss

The issue is that I was told there were no additional charges. I asked specifically about this.

As I mentioned in my previous post, I have no issues in paying for a service I am aware of, but not one that may appear in the small print later on. I'm still hoping it is all included.

EdInvestor

Well done judith_sw in chasing up this issue.The question of charges and commission appears to be deliberately opaque to confuse the customer.

What is the reduction in yield figure for the investment?That will show you the effect of the charges at specific growth rates and may be a bit more accurate.You also have to add on various hidden charges which do not have to be disclosed relating to dealing within the funds you have chosen.

Not transparent at all.

atw_uss

Thank you.

I am concerned about the lack of clarity in the documents I have been sent. While I am more than happy to pay for necessary services, including those of the adviser, what is really bothering me is the sudden appearance of the £600 fee, which was never mentioned before, despite my asking on at least two occasions about charges. AXA's 0.7% charge was the only one mentioned.

Another point is that the adviser knows that I am unlikely to pay into the pension for more than three years, as I hope to return to a company pension then. £600 over two years + AXA's charges suddenly seem high.

I am hoping that this will be cleared up in a phone call on Monday.

dunstonh

The issue is that I was told there were no additional charges. I asked specifically about this.

And there isnt.

What I find unclear - and I've read this a number of times - is whether the 0.7% annual charge will cover the adviser fees, or whether the adviser payment is over and above these fees

The adviser is paid out of charges. Not in addition to them.

The question of charges and commission appears to be deliberately opaque to confuse the customer.

They are not explicitly linked. I think Judith is expecting them to be.

what is really bothering me is the sudden appearance of the £600 fee, which was never mentioned before, despite my asking on at least two occasions about charges. AXA's 0.7% charge was the only one mentioned.

The Barclays rep should have pointed out their remuneration to comply with FSA rules. However, the most important thing is to highlight the charges you pay. You were told 0.7% and that is what you are paying.

Another point is that the adviser knows that I am unlikely to pay into the pension for more than three years, as I hope to return to a company pension then. £600 over two years + AXA's charges suddenly seem high.

Again, you are assuming that the £600 is an explicit charge. If it is a mono charged plan with a 0.7% annual management charge then that is all you pay.

Unfortunately, unlike other retail businesses, advisers dont just have to tell you the charge you pay but also the gross profit. This can confuse things as often the commission has no relation to the charges. Its a bit like buying a machine machine and checking three different places and buying from the one that makes the least profit rather than the one that costs the least (service ignored in this example).

atw_uss

Thanks for the detailed reply.

Regarding the £600 fee, do you think this is a reasonable charge, given that Barclays aren't independent? I have no idea about fee levels.

I realise that in the long run, a £600 fee to a good adviser may lead to investing in a better performing fund than going for a stakeholder with slightly higher charges but lower performance.

yelf

axa arent barclays.

dunstonh

Barclays have a small whole of market arm but the majority of their sales reps are multi-tied (limited panel).

Regarding the £600 fee, do you think this is a reasonable charge, given that Barclays aren't independent? I have no idea about fee levels.

seems fair enough for a simple transaction like setting up a stakeholder. BTW, thats the first time in the thread you mention stakeholder and that means that there can only be an annual management charge. It is also the logical product given the short timescale.

That said, I am a little confused. AXA pulled initial commission on their stakeholder earlier in the year. Now the tied/multi-tied salesforces may still get it. Or more likely their remuneration isnt based on the commission (often the case with tied reps) and the figure is a cost of advice figure rather than a commission figure.