final salary pension and IFA problem

Rikaroo

Help desperately needed.

Wife and I are 40 with 2 young kids.

My wife started a council job 11 months ago and has joined the final salary scheme. She has a couple of weeks left to decide whether or not to chuck all her previous pensions into her new final salary scheme or not. Value of old pensions is about 80K.

She went to see an IFA for advice but he just did a questionnaire to assess her risk attitude and suggested a wrap including things like jupiter etc. Since he didn't address the final salary question I thought we ought to get away from him before he started charging.

We asked him if we did it ourselves and put the 80k of old pensions into the govt final salary, would there be any charge from him. He came back saying we already owe him £600 for 3 hours work. To transfer the pensions as per his suggestion he'll charge £1900 plus annual commission:mad:

Wife and I are panicking now. What he's done couldn't have taken 3 hours. I tracked down one of her pensions myself in 10 minutes!
What he has done could have been done by juniors, not at £200/hour. He didn't tell us when chargeable work commenced.

So 2 questions...

1. Do we have to pay the guy?

2. Put the 80k into final salary, or, go with the IFA and just pay the massive fees

dunstonh

he'll charge £1900 plus annual commission

I cant see that. It equates to 2.375%. Typically IFA fees for servicing are 0.5% to 1%. Are you mixing up product & investment charges with commission?

Also, if he is fee based, he wouldnt be taking commission. That is the whole point of fee basis.

Wife and I are panicking now. What he's done couldn't have taken 3 hours. I tracked down one of her pensions myself in 10 minutes!

A pension transfer takes about 3-9 hours typically depending on the scheme and what you are doing. Multiple schemes increase the workload a lot. I spent 4 hours writing a report recently on multiple transfers.

What he has done could have been done by juniors, not at £200/hour. He didn't tell us when chargeable work commenced.

Dont try and judge what you dont know.

1. Do we have to pay the guy?

What does your fee agreement say? That is the key document

2. Put the 80k into final salary, or, go with the IFA and just pay the massive fees

Who says the fees are massive? They seem quite fair on the fee side. £600 for transferring pensions is good value.

Which option meets your needs best? final salary scheme or money purchase?

Aegis

Did you sign any form of client agreement that states you'll pay him by the hour if you choose not to proceed with advice? If not, you probably don't have to pay anything, but if you've agreed to pay him for work you're going to have to argue with him as to whether it was the work you actually agreed to pay him for. If he's done something else off his own bat without your consent, again I'd be surprised if it's enforceable, but if you agreed to take whatever advice he provided and to pay him for providing it, then you may be required to pay something.

Check everything you've signed and see what you agreed.

gadgetmind

Rikaroo wrote: »

1. Do we have to pay the guy?

Have you signed a contract or agreement?

If not, then his only option would be to claim there was a verbal contract and there has been partial execution.

If you have signed something, then you need to see what it says. However, as he seems to have ignored your needs and concentrated on his own, I think the boot is on your foot.

In your position, I would tell him that all future communication must be in writing, and then take it step by step depending on how tenacious he is. I think that once he realises you're not a soft touch, he'll back off.

Pensions are like pearls on the sea bed. It's a shame you have to swim through sharks to get them!

atush

I am thinking itmay be a good idea to transfer her old pensions into the FS scheme. but you need to ask her HR dept how many 'years' at 1/60 or 1/80 it will buy or will it be in an AVC and what the choices and charges as for that.

AS for the IFA, it will all depend on what your agreement was, but if you asked about transferring the old pensions to the new FS one and they didn't either research or give you answers on it you have a good case for breach of contract/duty as they didn't do asyou asked.

bigfreddiel

Rikaroo wrote: »

My wife started a council job 11 months ago and has joined the final salary scheme. She has a couple of weeks left to decide whether or not to chuck all her previous pensions into her new final salary scheme or not

She went to see an IFA for advice

1 if she is planning to stay with the council post for 10+ years or hopefully till retirment at 67 then buy into the scheme - and make additional payments - you won't have to worry about share price cashes or ifa's

2 don't engage an ifa if you know a bit about funds supermarkets and so on - all an ifa can do is access some areas you can't - its a closed shop basically - the one that advised me was about as useful as a chocolate teapot! don't get me wrong they do have their uses - but your post makes me think you're not exactly clueless and can find out stuff for yourself - its not too hard - you just need to do it.

cheers

fj

Meeper

What you do depends on a great many things, not the least of which is a determination of how many years' equivalent service can be bought for the lump sum transfer. That is a key factor.

Rikaroo

Thanks so much for replies guys. You’re all lovely!
Just realised I'm a newbie and everyone has to be nice. Isn't that splendid!

Got some more figures, (ballpark)

Her pot is £80k from 4 different previous pensions, none of which are final salary.
Her new council/gvt pension will give her additional years for £10k/year so she could get around an extra 8 years.
At her current salary, just for illustration, each year would get her £723/year in retirement
So moving the £80k pot to her newish 11month old gvt final salary pension would get her £5784/year in retirement (I appreciate her salary may go up but so might inflation so these figures are for comparison)

Or

The IFA's advice of putting it in a 'whole of market wrap' apparently pays a full annuity of £15200 (is that per year in retirement?)
Worryingly, the next column in his report says 'real terms £4930' What does this mean?
That's apparently based on medium growth of 6%bond, 7%equity. (After or before RIY @year5 7% down to 4.59%/year and @year25 7% down to 4.95%/year?)

Are final salary schemes still wonderful?


The other issue of his charges his fees are £1900 to set them up (put the 4 pensions into his suggested wrap), then .75% 'annual fee'
Is this normal?

Why does this all have to be so complicated/expensive? Also peeved at the way the majority of a normal pension disappears if she dies. I'm minded to take the £80 pot and buy bricks n mortar to rent out for ever with no mortgage on it. Then if she or I die 100% of the house/rent/pension is still there. If we both die, it's still there for the kids. Cheery thoughts for you all there...

gadgetmind

Rikaroo wrote: »

The other issue of his charges his fees are £1900 to set them up (put the 4 pensions into his suggested wrap), then .75% 'annual fee'
Is this normal?

Sadly, yes, and some IFAs would quote £4k up front and 1% a year.

Is that £4930 annuity after a lump sum, is it indexed, and is there any spouse pension? The "real terms" bit means that the annual is being adjusted for inflation. You might get £15200 a year, but by then, it will only buy what £4930 buys you now.

Regards pension dying with her, you can get the annuity to also cover a spouse, and you can also put a pension into drawdown.

Regards taking the £80k and buying a house, you can't do that as pension rules don't allow it.

That final salary offer looks rather sweet to me.

dunstonh

The other issue of his charges his fees are £1900 to set them up (put the 4 pensions into his suggested wrap), then .75% 'annual fee'
Is this normal?

its within typical range for pension pot of £80k. You could get cheaper on the initial set up and possibly down to 0.5% on the servicing but typically you find portfolios under £100k pay a little more.

Why does this all have to be so complicated/expensive?

Regulation, investment management and servicing. You can DIY a lot of it if you want but if you dont DIY, then you have to pay someone to do it.

Also peeved at the way the majority of a normal pension disappears if she dies.

It doesnt. What makes you think it does?

Rikaroo

The final salary pension gives her 1/60th final salary/year worked, but if she dies the widower gets only 1/160th so just £268 for every year she worked there.

The wrap isn't quite as bad, giving a 'reduced annuity of 50% to be paid to dependants.'

If she/we had put the money in property then whoever died first, 100% of the property/rental income would still be there?