SIPP, Hargreaves Lansdown and Funds 2006 (dunstonh)

jamesd

If it's defined benefit (final salary and similar) it's much stricter because it's often the wrong choice. If it's defined contribution it's not a legal requirement and a place like Hargreaves Lansdown is entirely happy to receive such transfers on execution only basis.

Seems that you might need a different IFA or might need to discuss just how little advice the one you have now thinks must be provided to meet compliance obligations. Pretty much the whole point of execution only is that it's just buying the product without advice because yo know what you're doing, so there's supposed to be relatively little liability. Requiring everything to be advised just adds lots of avoidable cost for those who know what they are doing or with relatively small amounts of money involved.

A tax free lump sum is yours to do whatever you like with. Except from the recycling back into a pension limitation, but that's only a cap and requirement to leave more time, not a bar on recycling.

Yes, you'll be taxed at your top rate and get it rebated if it's a pension. The basic rate will be paid to the pension provider by HMRC, higher or top rate claimed via a tax return or letter to HMRC.

No tax relief on the way in for an ISA: pensions are tax relief on th way in, none on the way out (except the lump sum) while ISAs are none on the way in but full tax relief on the way out.

The GAD allowance is an annual allowance. Either you use it that year or you get another one the next year and lost the chance to use any unused part of the allowance for the year that just ended. Like the ISA contribution limits, it's "up to this" and no saving of the allowance for use in later years.

Yes, you can transfer a pension fund that is in drawdown. As usual it's not required for a provider to accept this but there are plenty who do.

optimist_2

So the IFA is not correct in his statement that execution only cannot be done any more? My transfer is not a defined benefit transfer, and I am sure that the transfer of FSAVC funds is not prohibited. So it looks like I may need a different IFA?

I have asked him to complete an execution only transfer, with fee based investment advice going forward. Should this be within his compliance parameters? Hargreaves Lansdown, for example, would be quite prepared to do this.

If I need to find a new IFA who will do execution only and rebates, how do I go about doing that, while ensuring the quality of his investment advice?

Thanks

dunstonh

So the IFA is not correct in his statement that execution only cannot be done any more?

He is right in his case if his PI insurer have said you cant do it (or pay more if you do want to do it) or if the compliance company he uses tells him that he should not do it. As far as FSA is concerned though no he isnt.

It's risk management basically. The FSA has been so changeable in its approach to things over the years that you often do not know if you are coming or going. The FSA has taken some retroactive action against firms in recent years and compliance firms and PI insurers have become concerned about this. So, the solutions are to restrict what you can and cannot do in certain areas or pay extra to do it (to cover the increased checking and risk). If you don't do enough business in that area of restriction then its not worth paying the extra.

An FSAVC is now a personal pension (since 2006). An in-house AVC would see restrictions with many firms given the extra risks of transferring these.

If I need to find a new IFA who will do execution only and rebates, how do I go about doing that, while ensuring the quality of his investment advice?

You just need to ask questions and look at the quality of the response and information given. Is there a structure and process or is it all a bit haphazard and random.

optimist_2

Can you explain what PI is? Do qualifications, such as Diploma of the Personal Finance Society or Chartered Financial Planner, mean anything as far as investment expertise is concerned?

jamesd

PI is professional indemnity. The insurance that will end up having to pay out if he makes a bad mistake or is judged to have got something wrong even if he didn't.

You could ask the IFA if he'd do an execution only transfer from a SIPP. If yes you could transfer the FSAVC to HL and pay HL's £75 transfer out fee to get it where you want it to go. Might still be cheaper than some other options, depends on what IFA alternatives you can find.

dunstonh

optimist wrote: »

Can you explain what PI is? Do qualifications, such as Diploma of the Personal Finance Society or Chartered Financial Planner, mean anything as far as investment expertise is concerned?

PI is professional indemnity insurance. Its insurance the IFA firms are required to have to cover redress on mis-sales. the amount the firm pays in premium reflects the risks of their business. Hence why many IFA firms choose not to transact in low volume high risk transactions as the increased cost in risk premium is not recovered by the volume of business that comes from that area.

Chartered Financial Planner means a higher level of qualification has been achieved. However, it does not mean a greater investment expertise. Their expertise and focus may be in other areas (corporate, trusts etc). Plus, when it comes to higher level qualifications for investment strategies, they tend to be at the level below chartered (CII J06 exam for example is at the level below chartered but above the standard level).

Using a chartered financial planner for a transaction that doesnt require their skills and knowledge can be expensive overkill. Would you use a brain surgeon to apply a plaster.

Expertise is important. As is experience. However, qualifications, whilst important, does not indicate quality. Also, nowadays, a lot of what an IFA does is based on software and third party research. An IFA is unlikely to decdie sector allocation as the IFA doesnt have the skills or information to do that. The IFA will buy the information or get it supplied. An individual is unlikely to buy portfolio software costing £5k a year but an IFA is as it can be used across all the clients.

optimist_2

James, why might he be more likely to do a transfer from a SIPP?

jamesd

A SIPP isn't any form of workplace pension so it avoids possible work pension rules that an FSAVC might trigger even though it's now just another personal pension type. A SIPP is also one of the highest risk pension wrappers, so a transfer from one to just about anything else would be seen as a reduction in risk. I doubt it would work but no harm in asking.

optimist_2

With regard to transferring between SIPPs, I know this is relatively easy, as it is all done on an execution only basis, the only diffrence being exit charges from one and set up charges (if any) on the other. So you can pretty much do what you like.

Given my recent experience with trying to find an execution only IFA, I am thinking that the situation might not be so simple in the case of PPPs. In the case of moving from an execution only PPP to SIPP, I think that would be fine, but what about if you wanted to move from PPP to PPP. You would either have to find a discount broker who dealt with execution only transfers onto the new platform, or go through the IFA advised route. I have not come across any discount broker/IFA who is prepared to offer execution only onto the Skandia PPP yet, apart from clubfinance. So it seems to me that your transfer options going forward are limited with a PPP. What about if you have a PPP contract, with advice written in, either as a percentage, or as a fee basis. What happens if you want to change adviser, but keep the same PPP, or transfer onto a new PPP and change adviser? What is the situation then?

I was reading last night that post RDR IFAs will be encouraged to conduct much more execution only business. So I am currently thinking that it might be best to transfer for the moment into HL. This will give me the most flexible transfer options going forward, once things have settled down post RDR, and once I have a better idea of the investment process. In addition, the HL SIPP has a cash account, that I can fall back on if I need to. HL provides several tiers of investment advice, or the IFA has said he is happy to provide investment advice on the HL SIPP for an initial risk assessment fee of £250 and £40 per month ongoing.

dunstonh

I have not come across any discount broker/IFA who is prepared to offer execution only onto the Skandia PPP yet, apart from clubfinance. So it seems to me that your transfer options going forward are limited with a PPP.

Skandia only allow setting up of applications online. Not by paper. The online execution only brokers want to do as little work as possible. So, Skandia does not fit that model as it requires the firm to do all the work. Whereas a paper application completed by the consumer only requires a couple of bits to be added to it and then sent on as it is. So the online discount brokers mainly operate a panel.

What happens if you want to change adviser, but keep the same PPP, or transfer onto a new PPP and change adviser? What is the situation then?

One simple notification is required.

I was reading last night that post RDR IFAs will be encouraged to conduct much more execution only business.

I doubt it. However, some of the salesforces are giving up advice to provide execution only platforms. That is mainly down to the cost of advice going up but still wanting to offer something.

Europe wants to ban execution only in true nanny state style. It is still under consultation but I doubt it will happen.

http://citywire.co.uk/new-model-adviser/europe-proposes-ban-on-execution-only-investment/a461073

HL provides several tiers of investment advice, or the IFA has said he is happy to provide investment advice on the HL SIPP for an initial risk assessment fee of £250 and £40 per month ongoing.

Thats expensive as it is on top of the 0.5% trail commission that HL get already. Most IFAs will accept the 0.5% to cover ongoing servicing. That said, your fund is at the smaller side. So, an increase is not unreasonable. Also, past posters have not been that impressed with HL advice. Too many HL products and HL funds used which calls in to doubt whether you are getting independent advice or more of a multi-tied advice (no IFA would touch HL's own brand funds as there ae plenty of better alternatives).