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Going Rate for Pension Charges
Trinity1011
Posts: 7 Forumite
My employers have switched the IFA used to oversee our group company pension and are recommending a change of policy. The one they recommend does appear to have a far better performance history over the last 5 years and is managed. However i am concerned about the level of charges, this being 3% for the transfer (of my £30k - equating to £900) and a 0.5% annual charge (£150). Is this the going rate?
Thanks
Thanks
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Comments
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0.5% annual charge isn't too bad, but check whether that is TER or AMC. The latter doesn't tell the whole story!
I'll leave others to comment on that 3%. It looks high to me but I am notoriously "careful" regards fees!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »0.5% annual charge isn't too bad, but check whether that is TER or AMC.
Hmmm, I just had a rethink. The 0.5% might just be the trail fees to the IFA, and there might be fund fees on top of that. Eeek!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I am not sure what TER and AMC are. The reduction in yield for the transfer is 2.3%. Again is that good or bad?0
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gadgetmind wrote: »Hmmm, I just had a rethink. The 0.5% might just be the trail fees to the IFA, and there might be fund fees on top of that. Eeek!
The 0,5% maybe yearly servicing charge.
OP did you ask for just a one off transfer or a yearly service of your pension as well?0 -
but check whether that is TER or AMC
Pension should always be shown in TER. So, if UT funds are being used, the TER should be looked at. If Pension funds are being used then the AMC is the TER.
On a group scheme then the 3% seems massively high based on limited info (i.e. what is the total value of the group scheme, if many millions of pounds then that would be very high).
0.5% is the going rate for servicing IFAs on top of the clean annual charge (so a clean charge of 0.3% plus IFA charge of 0.5% would be 0.8%). You tend to find group schemes factor the IFA remuneration into either the annual charge OR an initial charge. Not both (unless it is a reasonable split).The reduction in yield for the transfer is 2.3%
Very poor. Ideally you should be looking at around 0.5% on non servicing cases to 1.5% on servicing (subject to investments). i dont do group schemes but a colleague does and he was saying the other day that the RIY on the schemes he deals with are around 0.7% including IFA remuneration when using internal funds.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
As a datapoint, when we moved our company's group personal pension, there was no up-front fee and the TER was initially 0.75%pa but has now been negotiated down to 0.5%.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Thank you for comments. Looking at the info i have received from the IFA the 3% is termed as "Initial Commission" and they claim it would be unprofitable to to do the transfer any cheaper. The transfer is from my current poorly performing pension fund to a new "better" one.
The 0.5% is for "fund based renewal commission" ie the cost of annual reviews and ongoing ad-hoc advice.
The group scheme is only small with around 30 people so it is not massive amounts involved.0 -
You might not think it's massive amounts but if everyone at your place is similar to you thats 27k straight away in upfront fees, looks excessive.0
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Trinity1011 wrote: »the 3% is termed as "Initial Commission" and they claim it would be unprofitable to to do the transfer any cheaper.
Their profits are their problem. There is no need for you all the buy them a new BMW just for filing in a few forms, so don't!
The move should cost nothing if they then get the 0.5% trail. Please ensure hard negotiation is done, with walking away and paying zero for work done to date as an option, as everything is negotiable.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I agree with the above and I know my colleague that does group schemes would too as he is dealing with moving a scheme from one provider to another 0.1%-0.3% saving (fund based discounts) over current scheme with no initial charges.
When you get a quote from a builder to do a job, one will say £10,000. Another will say £20,000 and another will say £30,000. Financial advice will have the same sort of pricing differences.
The Reduction in yield (RIY) on a group scheme with internal funds really ought not be more than 1.1%. (1% AMC equates to 1.1% RIY). If you want to use external funds then fair enough but internal (own brand funds) ought to be under 1%I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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