Friend 'lost' £20k after transferring Pension?

buel

Hello,
A friend was telling me today that after being advised to transfer his pension from his work pension (Scottish Widows where his employer gives 3%) to 'Met Life' by the same advisor who deals with the work company pension, his fund has decreased by £20k.

His employer will not pay their 3% to Met life.
I asked how much/what percentage the advisor took for completing this transfer and he said he didn't know as the advisor made it 'very complicated' (his words, not mine) but he did mention an 'Administration fee' amongst others.

My question is is this as bad a deal as it sounds or is the £20k loss just a typical short term loss?

The advisor didn't take an initial fee for this 'advice', which he has advised many others to do, and they have, which leads me to wonder why he would give advice on this....unless there was an incentive for him to do this, such as a fair amount of fees etc.

jem16

buel wrote: »

His employer will not pay their 3% to Met life.

Will they still pay into the pension with Scottish Widows?

My question is is this as bad a deal as it sounds or is the £20k loss just a typical short term loss?

How much is the actual fund?

The advisor didn't take an initial fee for this 'advice', which he has advised many others to do, and they have, which leads me to wonder why he would give advice on this....unless there was an incentive for him to do this, such as a fair amount of fees etc.

Presumably the adviser is working on commission basis for this. He will probably have been paid by Met Life but how much he was paid and how much was down to the natural drop due to the falling market would be impossible to tell without more info.

gadgetmind

buel wrote: »

his fund has decreased by £20k.

Turn the man with the pinstripe suit and gold watch upside down and shake him.

dunstonh

My question is is this as bad a deal as it sounds or is the £20k loss just a typical short term loss?

A 20k loss on a 30k fund is a massive lost. A 20k loss on a 100k fund (given there has been a 20% stockmarket crash/correction in the last 2 months) is not much. If its more than 100k, then its a drop in the ocean.

atush

If the advisor advised he leave a plan where he gets employers contribs, to one that he doesn't does not sound wise to me. In fact, it smells of miss selling to me.

jem16

atush wrote: »

If the advisor advised he leave a plan where he gets employers contribs, to one that he doesn't does not sound wise to me. In fact, it smells of miss selling to me.

Not if the employer will still continue to contribute to the old plan whilst also allowing a partial transfer to a new plan which may have a better choice of funds.

atush

I hope that is the case, but who knows. The OP will have to tell us, or better yet get his friend to ask for himself.

CLAPTON

me thinks we need the full actual facts from the horse's mouth rather than a muddle from a well meaning friend

Loughton_Monkey

Yes, the bottom line is that it could be anything from "the best advice he has ever had" to "a huge rip-off".

As has been said, there is no point saying someone's lost £20K without relating it to the original sum!

Best case would be the employer still contributes to 'official' scheme, whilst your friend has been given a cheaper alternative, with lower charges and better funds - and his loss is a tiny fraction of his total fund and far less than he would have expected in the latest 'adjustment' .

Worst case would be that he has lost his 3% employer contribution, has gone into a much higher charging set of funds, in a risk profile totally alien to his needs, and paid a fat fee and/or other charges to the so-called advisor - who would be 'bang to rights' in any official complaint.

The OP shed no light whatsoever on which of these it could be.

atush

I must admit I was basing my thoughts (although I did ask about future contribs with an IF) on scenario 2.

We will have to wait to hear what the scene is 1, 2 or3.............

jamesd

Met Life seems like an odd place to transfer to, they aren't a major UK provider.

Did the loss happen at the time of transfer or later? If later, what was the exact timing and what investments were selected in the original and new pension plans? The possible causes for a loss of that size are:

1. Costs of switching, including fees or commission charged by the adviser who sold the new pension.
2. Just market movements that would have affected the money wherever it was.
3. Different investments in each, with the ones in the new one moving more or less than the original one.

The adviser should have given reasons for recommending the transfer and a list of charges, commission and fees, for doing the work. Checking those should prove useful.