Options to take on my pension, help/advice welcome

zagfles

jem16 wrote: »

Yes you have missed something.

The cost of commission is built into any quote even if you go direct to the company providing the annuity so you pay it regardless. If you use an IFA the company pays the IFA the commission, if not they keep it for themselves.

I thought the new RDR rules from start of next year stopped all that?

http://www.fsa.gov.uk/smallfirms/your_firm_type/financial/pdf/rdr_adviser.pdf

The PP wants to buy in Feb next year.

Have I missed something?

dunstonh

I thought the new RDR rules from start of next year stopped all that?

Only on advised cases. Non-advice can still take commission.

The PP wants to buy in Feb next year.

Have I missed something?

So, if he does DIY next Feb then it will have commission of say £1200 factored into it or if he uses an IFA then the IFA can take a fee of £1200 and that will be factored into it. net result is the same.

Many financial products have been the equivalent of fee basis for many years now. Pensions were indeed one of the earliest to move to that basis. Before the RDR was even confirmed.

zagfles

dunstonh wrote: »

Only on advised cases. Non-advice can still take commission.



So, if he does DIY next Feb then it will have commission of say £1200 factored into it or if he uses an IFA then the IFA can take a fee of £1200 and that will be factored into it. net result is the same.

Many financial products have been the equivalent of fee basis for many years now. Pensions were indeed one of the earliest to move to that basis. Before the RDR was even confirmed.

Sorry I'm confused. Are you saying if the customer goes direct to the product provider they'd have to pay exactly the same "non advice" commission to the provider as they would have paid to an IFA?

Does this mean the RDR rules are basically useless? Do the FSA not have anything to say about it if so?

Or would the "non advice" commission in reality be a lot less?

dunstonh

Sorry I'm confused. Are you saying if the customer goes direct to the product provider they'd have to pay exactly the same "non advice" commission to the provider as they would have paid to an IFA?

Possibly a bit less, possibly a bit more. However, the commission ban only applies to advice. Not non-advice. If you had a £100k pot with 1.5% commission rate (which is fairly typical) then on DIY, the company would pocket £1500 commission. If you went to an IFA and the fee was say £1500 then there is no commission but the £1500 can be collected via the product (and paid via the commission system) and the effect on the product is exactly the same.

Does this mean the RDR rules are basically useless? Do the FSA not have anything to say about it if so?

The FSA decided that the commission ban would only apply to advice. Not to non-advice sales. So, it is their decision. RDR rules are not useless. It just has quirks. For example, for a 30 year old starting a regular contribution pension, an IFA taking say a £750 fee and deducting it from the pension over year 1 can come in cheaper than a nil commission stakeholder. Quirks like this exist all over the place.

Or would the "non advice" commission in reality be a lot less?

Typically commission on non-advice cases would be higher than advice fee in all but the smallest cases.

zagfles

dunstonh wrote: »

Possibly a bit less, possibly a bit more. However, the commission ban only applies to advice. Not non-advice. If you had a £100k pot with 1.5% commission rate (which is fairly typical) then on DIY, the company would pocket £1500 commission.

What possible justification could the company make for charging that level of commission for non-advised? I though the whole point of the RDR was to remove advice commission built into products - ok there'll be distribution costs etc but surely that must be a lot less. It'll be interesting to see the difference in the actual costs next year. Also how much it'd cost via execution only brokers.

Though at the moment annuities look bad value as gilt yields are so low. Personally I'd consider drawdown, and the charges are MUCH less.

AlanWragg

Thanks all for your help and opinions, I am going to make an appointment to see an IFA.

This experience is certainly eye opening.

For what it's worth my thoughts after nearly 50 years work;

Avoid all debt if at all possible.

Save what you can afford in a good rate savings account

Avoid pensions, once you moneys paid in you've lost any control / access to it and others decide how much they will let you have back. Strikes me that everyone else does very nicely out of it though. As for tax advantaged, unless you are on next to nothing it will be taxed when you take it anyway. Employers contributions will need to be massive to counter the down sides.

Avoid dealings with all Financial services / insurance companies.

Keep control of your own money don't give that control to others.

Live within your means!

taktikback

AlanWragg wrote: »

Avoid pensions, once you moneys paid in you've lost any control / access to it and others decide how much they will let you have back. Strikes me that everyone else does very nicely out of it though. As for tax advantaged, unless you are on next to nothing it will be taxed when you take it anyway. Employers contributions will need to be massive to counter the down sides.

It doesn't look like you've taken on board what's been said above. You haven't "lost control" - there are restrictions applied because of the tax advantages you have been given, and these are clearly stated at the outset. Plus the regulations have changed over the last 10 years to make things much more flexible.

You have a personal allowance when you retire - If your income is more than that, then you will be taxed on the excess - nothing earth shatteringly unfair about that. After all, you get tax relief at 20% on the way in - 40% if you are a higher rate tax payer -which you are much less likely to be in retirement!

If you follow your preferred savings route you can factor in an employer contribution of 0%. Whilst many employers don't contribute "massive" amounts, all are now obliged to contribute more than 0% -more like 4-6%+ in the private sector and 15-25% in the public sector. Last time I looked, I didn't see any savings accounts that could match that.

Why not read around the subject and see just what flexibility exists for you -look at drawdown -look at investment options, look at phased retirement -look at salary sacrifice - look at the need for long term growth before you recommend that people stick their retirement funds in "savings accounts" thereby guaranteeing that they will under perform over the long term.

jem16

AlanWragg wrote: »

Save what you can afford in a good rate savings account

If that's your only means of retirement funding, then you will end up very poor.

Avoid pensions, once you moneys paid in you've lost any control / access to it

No You don't. You still have full access to it and can decide what to invest in and how to invest.

and others decide how much they will let you have back.

You've not really listened to what people on this thread have been saying to you unfortunately.

Yes there are restrictions but they are designed to make sure you don't run out of money during your retirement, which is what a pension is designed to do.

dunstonh

What possible justification could the company make for charging that level of commission for non-advised?

They dont have to justify it.

I though the whole point of the RDR was to remove advice commission built into products - ok there'll be distribution costs etc but surely that must be a lot less.

For advice cases, it is generally expected that medium size or higher investment linked cases will be better off. IFAs will focus on those and leave the smaller end of the market. The smaller end will focus on low value stuff. So, the commission has to be higher to cover the costs.

dunstonh

Avoid pensions, once you moneys paid in you've lost any control / access to it and others decide how much they will let you have back. Strikes me that everyone else does very nicely out of it though. As for tax advantaged, unless you are on next to nothing it will be taxed when you take it anyway. Employers contributions will need to be massive to counter the down sides.

Avoid dealings with all Financial services / insurance companies.

Your suggestions would result in being worse off. You have opinions but they are not based on facts and you dont appear to be listening to what has been said.