IFA`s Commission

Monobloc

IFA is charging £900 commission,instead of fee, on £18K pension pot for arranging enhanced annuity.Is this average or high for this type of transaction?.Origonal provider mentions a 1% commission to purchase non enhanced pension benefits.
Although the enhanced annuity provider is paying the commission,this must affect the annuity offered?.
Appreciate any advice.

phil.s_3

Monobloc wrote: »

IFA is charging £900 commission,instead of fee, on £18K pension pot for arranging enhanced annuity.Is this average or high for this type of transaction?.Origonal provider mentions a 1% commission to purchase non enhanced pension benefits.
Although the enhanced annuity provider is paying the commission,this must affect the annuity offered?.
Appreciate any advice.

Come January everything is going to change. At present Ifa's get paid huge amounts of money for transferring poorly performing funds to other probably poorly performing funds. Come January they are unable to receive any commission from the providers and instead are going to have to charge the customers.

Have a shop around

dunstonh

IFA is charging £900 commission,instead of fee, on £18K pension pot for arranging enhanced annuity.

£900 sounds more like a fee than commission. Typical range is in the £750-£1000 mark.

Origonal provider mentions a 1% commission to purchase non enhanced pension benefits.

Sounds right for commission.

Although the enhanced annuity provider is paying the commission,this must affect the annuity offered?.

Its not commission. It is a fee. It is deducted from the pot

Monobloc

thanks for the comments phil.s.I am still not sure whether the IFA`s charges are par for the course or not.There again,Im not paying directly,the annuity provider is.The question is,how much does the difference between a moderate commision and a high commission impact on the amount of annuity offered.

Monobloc

thanks for your reply also Dunstonh,I thought I had this Fee/Commission business sussed.My IFA says he normally charges typical fees of around 2k.On this occasion,he is willing to settle for commission.

dunstonh

Monobloc wrote: »

thanks for your reply also Dunstonh,I thought I had this Fee/Commission business sussed.My IFA says he normally charges typical fees of around 2k.On this occasion,he is willing to settle for commission.

Enhanced annuities allow the adviser to set his remuneration (as will most products by regulation from Jan 2013). The provider is not setting the remuneration (which would be commission). The adviser is taking a fee that he wants to take and you agree to (or not).

So, effectively, he is saying to the annuity providers that he wants to be paid £900 and the annuity providers will pay him that £900 irrespective of the pot value. That's a fee. If you dont tell the provider what you want to be paid then they often stick a default figure of around 2%-2.5% of the fund value after tax free cash. Whilst that is closer to a commission in the way that is has not been agreed but set by provider, it is still a deduction against your pot.

Charging £2000 for an open market option of one pension is greedy. Charging £900 is within typical range. You could probably get it down to £500-£750 with a bit of shopping around but you would find others going upto £1250.

mania112

phil.s wrote: »

At present Ifa's get paid huge amounts of money for transferring poorly performing funds to other probably poorly performing funds.

1) Is that so?

2) If it is, how will that change in January?!

EDIT: Seems to me that low pension pots will SUFFER post-RDR because the 'menu' cost of fees will be set as a middle-road percentage of pension sizes. One size fits all will not help.

sandsy

Even if it is a fee, if it is coming out of your fund rather than being paid directly by you, it will affect the level of the annuity offered, as you suspected. You will get lower annuity payments with a fee of £900 than you would if the fee was £600.

Monobloc

Thanks to everybody for your time and advice,namely Dunstonh,sandsy and mania 112.I am learning all the time.

phil.s_3

mania112 wrote: »

1) Is that so?

2) If it is, how will that change in January?!

EDIT: Seems to me that low pension pots will SUFFER post-RDR because the 'menu' cost of fees will be set as a middle-road percentage of pension sizes. One size fits all will not help.

Have to charge the client

bilbo51

dunstonh wrote: »

Charging £900 is within typical range. You could probably get it down to £500-£750 with a bit of shopping around but you would find others going upto £1250.

Is that irrespective of the size of the pot?