Pension choice and IFA charges

d4v34

Hi,
I've been looking to change my pension for a while and have been speaking to an IFA who has recommended a different pension provider.
I'd just like to check that the charges aren't excessive and the pension provider isn't on any kind of avoid list.

Pension is a personal pension from Skandia (collective retirement plan).
IFA charges are £750 one off fee plus 1% (sum up to £200,000) and 0.75% (sums over £200,000) active management fee.
Fund management fees are 0.43%.
No transfer or termination fees.

Thanks for any input.

CannySaver_2

Hi

Would be helpful to know how much you are transfering.

The 0.43% looks low, is this the TER of the funds you are investing in? Presumably trackers with that level of charge.

How much is the IFA charging you on an ongoing basis and what do you get for that?

The Canny Saver

jamesd

The Skandia CRA is one of the pension schemes that is quite often recommended by IFAs. It's a reputable plan with decent to good fund investment options and pricing.

The IFA charges of 1% and 0.75% are high for active management, which is normally charged at a maximum of 0.5%, less for higher pension pot sizes. whether that and the £750 one-off fee are reasonable can't be known without knowing which services are included and the approximate value of the pension pot involved.

Fund management fees of 0.43% are quite low for actively managed funds rather than tracker funds. How is the Skandia flat rate charge disclosed, is that explicit somewhere else or included in one of the percentages?

dunstonh

Pension is a personal pension from Skandia (collective retirement plan).

I have my pension with them. I use it frequently in advice cases. It has the potential to be the cheapest pension on the market. The pension is on it's last legs as it will fall foul to the platform review (which could see charges rise in some areas and fall in others). However, those that have the contract in place before then can stay on the old one (or if the new one is better, they can move at no cost).

IFA charges are £750 one off fee plus 1% (sum up to £200,000) and 0.75% (sums over £200,000) active management fee.

£750 is right on the money for fee basis. The annual remuneration for servicing is typical. 0.5% used to be the norm but that was based on cross subsidy (higher investors paying more and offsetting smaller investors). Cross subsidy is largely being removed as you cant use it like that from next January. So smaller investors will be paying more whilst larger ones pay less. I think those are reasonable.

There is one more charge. Skandia charge a platform fee of £68.50 p.a. This is whether you hold an ISA, pension or GIA (or all of them). It is one per person, not per account.

Fund management fees are 0.43%.

Sounds about right. It suggests that a combination of index trackers (probably blackrock Class D) and a few managed funds are being used. Possibly a core and satellite approach which is very popular. The commission on the funds is rebated as the IFA is taking a fee option.

d4v34

Thanks for the information everyone.

dunstonh wrote: »

The pension is on it's last legs as it will fall foul to the platform review (which could see charges rise in some areas and fall in others).

Can you tell me when the review comes into force as I'll have to act sharpish?

The suggested investments are indeed Blackrock trackers, the rest are gilts and property funds.

The current pension pot value isn't large (£80k) which is why I'm taking action now to address it.
Annual contributions will be in the order of £20k.

The active management fee covers a quaterly review including comparisons to benchmarks and any alternative investments and recommendations. An annual valuation and performance commentary and a revaluation of my risk profile.

I made a mistake on my previous post, looks like the Active Management Fee is on a sliding scale - 1% for £0 to £200k, 0.75% for £200k to £400k and .05% over £400k

Thanks

dunstonh

Can you tell me when the review comes into force as I'll have to act sharpish?

Some time between 2013-2014. (FSA not given date yet. It was mean to be end of this year but been put back a bit). However, platforms are gearing up for it with most expected to be in place by the end of this year.

You have plenty of time.

I made a mistake on my previous post, looks like the Active Management Fee is on a sliding scale - 1% for £0 to £200k, 0.75% for £200k to £400k and .05% over £400k

Thats more like it. The charging structure is similar to my own (tiers differ and I dont do quarterly on lower values, hence why rates are slightly different) but principle is the same). So, I cant argue with it!

fairleads

d4v34 wrote: »

Hi,
I've been looking to change my pension for a while and have been speaking to an IFA who has recommended a different pension provider.
I'd just like to check that the charges aren't excessive and the pension provider isn't on any kind of avoid list.

Pension is a personal pension from Skandia (collective retirement plan).
IFA charges are £750 one off fee plus 1% (sum up to £200,000) and 0.75% (sums over £200,000) active management fee.
Fund management fees are 0.43%.
No transfer or termination fees.

Thanks for any input.

When employing contractors to provide services to / for us, we're often advised to ask them for references. So that is my advice to you, ask the IFA what sort of annual returns have been generated by this particular pension model. The reason i say this is because by far the greatest cost suffered by most individuals is the cost of poor advice. Poor or inappropriate advice has a far greater (negative) impact on your financial future than costs. You see, high costs do not of their own lead to poor returns, but poor advice definitely does. So, especially in these troubled, more than ever before, you need to be sure that your IFA is giving you good advice.

dunstonh

The reason i say this is because by far the greatest cost suffered by most individuals is the cost of poor advice.

Evidence?

Poor or inappropriate advice has a far greater (negative) impact on your financial future than costs.

no more so than taking no advice and making a pigs ear of it. Except you get no consumer protection when you DIY whereas you do from poor advice.

You see, high costs do not of their own lead to poor returns, but poor advice definitely does.

And what in particular that has been posted has made you think there is even a hint of poor advice here?

atush

Cost sare the thing.

Advice is just that- advice. Paid for via an IFA for free from here and your mate down the pub. But no one will force you to take any advice paid for or not- it is your CHOICE.

So the only real comparison basis is costs really.

DavidLaGuardia

atush wrote: »

Cost sare the thing.

Advice is just that- advice. Paid for via an IFA for free from here and your mate down the pub. But no one will force you to take any advice paid for or not- it is your CHOICE.

So the only real comparison basis is costs really.

I agree slightly, but another factor is bevaviour. E.g. returns from investments compared to market being lower becasue of the tendancy of investors to jump into investments when prices are high and pull out when they are low!