Repensioning. Increase your pensions return without any risk discussion area

jem16

Plus sadly there's another factor

6) Whether or not you could become the victim of the forum poster who tries to persuade everyone to avoid an IFA and go DIY, meanwhile costing you a lot of money in the process

dunstonh

plus, sadly, there is an additional factor

5)Whether or not you could be the victim of "commission bias" or other misselling incidents if you go through an IFA, compared with doing it yourself.

Not if you go fixed commission/fee basis. No-one forces you to go to an IFA with maximum commission terms.

A lot of IFAs work on a standardised commission regardless of tax wrapper/provider/product. Particulary NMA IFAs.

Option 3 means the broker returns most of the charges to me.

No. That is not quite correct. A stakeholder pension would see a reduction of around 0.3% p.a. on zero commission terms. That is 1/3rd of the charges.

HL could see you paying more because the only charge they discount is the initial charge. They take full fund based trail commission and the average amc is 1.5%. That is more than a Scot Widows stakeholder and more than a scot widows personal pension with a spread. I assume you dont have the scot widows retirement account as that is geared to higher values. That can beat HL but only with higher fund values as it has tiered rates.

EdInvestor

dunstonh wrote: »

HL could see you paying more because the only charge they discount is the initial charge. They take full fund based trail commission and the average amc is 1.5%. That is more than a Scot Widows stakeholder and more than a scot widows personal pension with a spread.

Yes, but the HL offering is likely to be a SIPP featuring the best quality funds available (which tend to have the 1.5% AMC). The stakeholder will usually have only low quality internal insurance funds and the PP -where it offers external quality funds - may well charge a bit more than 1.5% for this limited choice.

Spoon77

Ok thanks for all the information so far, I'm starting to see the wood for the trees.

I've got a Personal Pension, not stakeholder. It's a mono-charge plan, with the annual charge based on each fund - based on current funds it's an average of 1.56%.

So, I'm back to the question of whether the charges are acceptable, or whether I could maximise my pension fund by changing the way I buy it.

From my basic calculations, the AMC in the first year will amount to about £90.

However, the IFA's commission for setting it up amounts to 5 x my monthly contributions. There's seems to be a little imbalance here...

dunstonh

Yes, but the HL offering is likely to be a SIPP featuring the best quality funds available (which tend to have the 1.5% AMC). The stakeholder will usually have only low quality internal insurance funds and the PP -where it offers external quality funds - may well charge a bit more than 1.5% for this limited choice.

A spread of funds can include some stakeholder funds as well as personal pension external funds. Particulary with cautious to medium risk investors. That can bring the average charge closer to 1.2%. If you are heavy in external funds then using unit trust/oeic funds can be better value for money.

So, I'm back to the question of whether the charges are acceptable, or whether I could maximise my pension fund by changing the way I buy it.

1.56% is fine if you value the advice. You could knock about 0.3% off that on execution only basis.

From my basic calculations, the AMC in the first year will amount to about £90.

However, the IFA's commission for setting it up amounts to 5 x my monthly contributions. There's seems to be a little imbalance here...

Dont mix up commission and charges to mean they are the same thing. As I have said already, some providers will pay a commission that will take them 10-15 years to recover. Some are just buying the business with no hope of recovering the commission paid.

EdInvestor

Spoon77 wrote: »

I've got a Personal Pension, not stakeholder. It's a mono-charge plan, with the annual charge based on each fund - based on current funds it's an average of 1.56%.

You'd expect to pay 1.25% at HL and make more money with unit trusts/OEICs instead of the insurance version of them.

dunstonh

You'd expect to pay 1.25% at HL and make more money with unit trusts/OEICs instead of the insurance version of them.

That is wrong. HL do not discount the AMC on their pension scheme. The typical unit trust fund has an amc of 1.5%.

jem16

EdInvestor wrote: »

You'd expect to pay 1.25% at HL and make more money with unit trusts/OEICs instead of the insurance version of them.

The annual charge on my Scottish Widows Personal Pension through an IFA is 1.14%.

EdInvestor

dunstonh wrote: »

HL do not discount the AMC on their pension scheme.

You're right they don't - the 0.25% discount only applies to direct and ISA investment.


So the charge in this case looks basically the same, the difference will be the fund choice.

dunstonh

That is why I have said in the past that Selestia (and now Scottish Widows Retirement account and Transact for larger portfolios) can beat HL as they all allow discounting on the annual management charge.