Moving my personal pension

shane100

Hi,recently spoke to an IFA about moving my prudential with profits fund into a maybe better performing pension fund.My transfer value is £31,298.77 which the ifa is going to take 1 change of £938.96(3.00% of the contribution) for the initial work he has carried out, then ongoing charges of 1% each year until my chosen retirement age for managing it.
The pension he has advised is with scottish life,they will take a 1.06% charge for management then additional investment charges for the separate funds.
I have spoke to family and friend who have said it would be better to leave my prudential pension where it is(i am not paying anything into it)as with all the charges i could be worth off going with the scottish life pension.
If i say to the ifa i don`t want to go ahead with the tranfer will i still be hit with a charge say the £938.96? as he has given me all the info of the new pension compared to my prudential, graphs etc.

Any help would be appreciated.

dunstonh

I have spoke to family and friend who have said it would be better to leave my prudential pension where it is(i am not paying anything into it)as with all the charges i could be worth off going with the scottish life pension.

The IFA would have needed to do a pension transfer analysis and cant transfer for transfer sake. In clean form, the Scot Life pension is almost certainly cheaper than Pru. What analysis have your friends and family done?

Remember that Pru has charges on it and from experience, most of their plans are more than Scot Life without the adviser charge. Scot Life is a good provider with a good fund range which allows a mixture of internal (cheap) funds and external funds (more expensive but better potential).

If i say to the ifa i don`t want to go ahead with the tranfer will i still be hit with a charge say the £938.96?

Depends on what you agreed. the initial charge +1% pa for servicing is a fair charge. so, nothing seems to be wrong on that front.

shane100

Thank you for the reply.Is the 3.00% he is charging for the initial work fair as i never agreed a price on that charge.Is it possible to try and get that down to a lower percentage as he said it was standard percentage they charge(is it really a fixed charge or can i challenge this)

cheers shane

dunstonh

Is it possible to try and get that down to a lower percentage as he said it was standard percentage they charge(is it really a fixed charge or can i challenge this)

Scot Life do not charge anything or set any figure. The advice cost is set by the adviser. It is then agreed between you and the adviser. To be fair the figure of £938 in monetary terms is in the ballpark of what you would expect. You can ask if it can be discounted but you only have a small fund value and there isnt a lot of scope there. The larger the fund, the more likely a discount.

ZacSpeed

shane100 wrote: »

Hi,recently spoke to an IFA about moving my prudential with profits fund into a maybe better performing pension fund.My transfer value is £31,298.77 which the ifa is going to take 1 change of £938.96(3.00% of the contribution) for the initial work he has carried out, then ongoing charges of 1% each year until my chosen retirement age for managing it.
The pension he has advised is with scottish life,they will take a 1.06% charge for management then additional investment charges for the separate funds.
I have spoke to family and friend who have said it would be better to leave my prudential pension where it is(i am not paying anything into it)as with all the charges i could be worth off going with the scottish life pension.
If i say to the ifa i don`t want to go ahead with the tranfer will i still be hit with a charge say the £938.96? as he has given me all the info of the new pension compared to my prudential, graphs etc.

Any help would be appreciated.

There are 3 IFA related activities here :-

1. Existing pension review & recommendation
2. Pension setup/transfer
3. Ongoing financial advice

It seems likely to me that the 3% (£928.96) is to cover the second activity and should only payable if you chose to proceed.

Assuming it is a good idea to transfer out of your with-profits pension (check carefully for annuity guarantees) the IFA charges look very poor value to me as you could do all this yourself with very little effort.

A low cost SIPP will cost nothing to setup and have (much) lower annual management charges than Scottish Life's 1.06%. Use the many SIPP/internet resources to choose and check how your fund(s) are performing and switch if you're not happy.

It really isn't difficult once you know where to look for the info.

jem16

ZacSpeed wrote: »

It seems likely to me that the 3% (£928.96) is to cover the second activity and should only payable if you chose to proceed.

It would be very unlikely just to be the cost of setting up/transfer. The cost of advice will cover the pension review, the comparison between the existing pension and all alternatives, the final recommendation and the work involved in setting up the new pension and transfer from the old. It will also give consumer protection over wrong advice.

If the OP feels that thios is something he can do himself then yes the cost of advice will be saved but there will be no consumer protection.

A low cost SIPP will cost nothing to setup and have (much) lower annual management charges than Scottish Life's 1.06%. Use the many SIPP/internet resources to choose and check how your fund(s) are performing and switch if you're not happy.

The annual management charges will depend on what funds are being used. Most managed funds in a SIPP will cost at least 1.5%amc so how do you equate that with much lower charges than Scottish Life?

mania112

Scottish Life Personal Pensions have a charging structure which reduces based on the fund size. If you have more than £26k the annual charge is 0.45% (and it gets cheaper again after £50k i think) when using governed portfolios - which have been solid in my experience.

So this IFA has recommended something external to hike the price up to 1.06%. It's all relative, if it performs better than a WP's by x% it would have been worth it.

The initial charge is fair for the work involved.

dunstonh

It seems likely to me that the 3% (£928.96) is to cover the second activity and should only payable if you chose to proceed.

That would not be logical. It almost certainly is the cost of research, advice and setting up.

the IFA charges look very poor value to me as you could do all this yourself with very little effort.

£928 looks like good value to me. Anything under £1000 is fine.

A low cost SIPP will cost nothing to setup and have (much) lower annual management charges than Scottish Life's 1.06%. Use the many SIPP/internet resources to choose and check how your fund(s) are performing and switch if you're not happy.

Except that Scot Life is not 1.06% as mentioned above. Plus, the OP doesnt appear to have the knowledge (and/or perhaps inclination) to review and rebalance portfolios.

gadgetmind

ZacSpeed wrote: »

A low cost SIPP will cost nothing to setup and have (much) lower annual management charges than Scottish Life's 1.06%. Use the many SIPP/internet resources to choose and check how your fund(s) are performing and switch if you're not happy.

Many "low cost" SIPPs are not as low cost as their puffage claims.

To achieve low costs when going DIY does involve a fair degree of work. In the past I have used an Aviva pension via Cavendish Online using a single all-in-one portfolio fund for fees of 0% up front and (from memory) 0.55% pa but I now use mostly trackers in BestInvest and HL SIPPs.

However, I'm prepared to put the work in and go it alone whereas the OP seems to want a lot of hand holding. Hand holding costs money.

ZacSpeed

shane100 wrote: »

Thank you for the reply.Is the 3.00% he is charging for the initial work fair as i never agreed a price on that charge.Is it possible to try and get that down to a lower percentage as he said it was standard percentage they charge(is it really a fixed charge or can i challenge this)

cheers shane

Well I seem to be in a minority of 1 on the fairness of the 3.00% charge for what appears to be a very straightforward piece of work for the IFA. Couldn't have taken more that an hour or two and although it might be industry standard to charge a flat 3% that doesn't make it fair or good value for you IMHO.

The IFA's 1% annual "servicing" charge will cost you another £300+ a year for the lifetime of the product. Are you clear what you are getting for this and think its worth committing to. What happens if you're not happy with their service, can you stop it or move to another IFA without penalty?

These maybe small percentages but they have a big impact on you pension fund over time.

The managed funds your pension would normally be invested in have annual charges of 1-2% which is on top of your pension providers admin charge of 1.06% (or maybe 0.45%...) and then the IFA wants 1.0% on top of this.

If inflation was 3% the underlying fund investments e.g. shares and bonds would need to grow in value by approx. 6% annually just to maintain real terms value of the fund.

In contrast you could have have a SIPP with Hargreaves Lansdown (or similar) that charge 0.5% admin and invest in tracker funds that charge only 0.3% annual fee. Break even is then only 4% growth.

Of course there are options in between and I'm sure the IFA walked you through all of these before recommending his.

Anyway you imply you haven't agreed to the charges in writing so think you have a strong position to negotiate a reduced fee for completion or fair payment for work completed so far.

Good luck with whatever you decide.

gadgetmind

ZacSpeed wrote: »

Well I seem to be in a minority of 1 on the fairness of the 3.00% charge

It seems like a lot of money to me, and no way would I pay such a fee, but who am I to say whether it's fair or not. Some people happily take their car to a main dealer for the wiper blades changing, which I doubt is exactly a cheap exercise, but people can spend their money howsoever they choose.

In contrast you could have have a SIPP with Hargreaves Lansdown (or similar) that charge 0.5% admin and invest in tracker funds that charge only 0.3% annual fee. Break even is then only 4% growth.

With HL, you'd pay 0.5% pa plus the TER for an ETF (or IT or equity) but it's £2 per tracker pcm, which makes holding a single Vanguard Lifestrategy tracker very efficient.

This appeals to my "keep it simple, keep it cheap" philosophy, so my wife's SIPP uses this approach. My own SIPP uses a slightly more complicated approach with a tilt woards Asia Pacific, EM, small/mid cap and high yield, and I also run a few other tricks more or less for fun. However, I use the LS tracker as a benchmark as if I can't beat that then what's the point in trying!

One does wonder how many portfolios using active funds do beat a single LS tracker? I guess time will tell.