IFA home visit re Pension/ISA

Robin_Jackson

Hello and a very happy 2013 to all the readers on here!

I'm new, so apologies if this has been covered (I have checked!). On Friday, my new IFA visited me at home to discuss my Pension and ISA. Apparently, due to new regulations they can't claim commission and instead, take one off fees...so I have the following options...

PENSION

Move pension and pay 3% upfront then 0.05% PA - or stick with where I am and pay 1.5% PA (due to my pension being sizeable and having 20 years left it was suggested that Id be best off paying the 3% upfront. I love watching my pension grow but apparently there are better pension firms to use than Aviva and I can make more going for a switch and 3% upfront?

ISA

Ive about 12k in an ISA, my IFA has grown this by 14% in the last year but apparently I can pay 3% upfront and 0.05% PA same as the pension. I could also pay 1.25% to my IFA and they'll look after it, as they have and done well with this 14% growth.

The IFA is back in touch this week, so I figured that I'd throw this open to debate on here - at present I'm thinking I switch Pensions and go for 3% upfront and pay the IFA the 1.25% and keep an eye on it.

Any feedback hugely welcome - my pension apart (which I started at 22 and seen grown via payments), my ISA experience is pretty poor.

THANNKS IN ADVANCE - ANY COMMENTS GREATLY APPRECIATED!

magpiecottage

The rules have changed but that sounds a bit smoke and mirrors to me.

Is the IFA talking about his firm's fee or total charges?

If it is the former then he needs to explain why he should charge more if it is with Aviva than elsewhere.

Also, remember Aviva is big enough to stand by any guarantee. Others may not be able to do so. Google "Arch Cru" or "Keydata" and you will see what I mean.

You need to think about how long this is going to be over too. 3% now and 0.5% ongoing might be cheaper than 1.5% per annum - but not if you are going to retire in the next couple of years.

bigadaj

What is the current value of your pension, this will allow an assessment of the fairness of the charge. Also I think the ongoing fee is more likely to be 0.5% but needs checking.

Fee for the isa is likely to be smaller because of the probable smaller amounts involved. Performance for this is ok but 2012 was a good year for equities and 14% is a fairly average return, think the ftse 100 was up around 8%, presumably excluding dividends, whilst the 250 was up over 20%,

Linton

Suggest you look after your ISA yourself. The experience you gain would give you more confidence and knowledge to take over your pension at a later date.

Robin_Jackson

Blimey - thanks for the replies!

I dunno about looking after the ISA myself - Im not the brightest and it looks like a mine field to me! I've 35k in the pension with another 20 years left to go so on that basis, the 3% upfront and 5% (apologies on the incorrect 0.05% figure) is over a longer time so therefore easier to cushion.

I dont think he was impressed with Aviva - the IFA doesnt do anything with the pension, he seemed to think switching it and paying the 3% one off/5% PA was a good idea.

gadgetmind

Robin_Jackson wrote: »

Move pension and pay 3% upfront then 0.05% PA

I wouldn't pay that 3% but I understand it's fairly common when using an IFA.

However, I think you mean 0.5% pa, and I suspect this isn't the entire fees that you'll be paying.

Ive about 12k in an ISA, my IFA has grown this by 14% in the last year

No, the underlying investments, mainly equities (stock markets if you like) have done this, and they've done this to most balanced portfolios.

apparently I can pay 3% upfront and 0.05% PA same as the pension. I could also pay 1.25% to my IFA and they'll look after it, as they have and done well with this 14% growth.

You need to understand the difference between up front fees, total annual fees, and the underlying investments. It's the last of these that generates growth and the former two that reduce it.

As it happens, I think you're better off using an IFA but don't think this is some magic wand that generates better returns and keep an eye on fees.

Robin_Jackson

Appreciated.

Am I right in swaying towards the 3% pension and 1.25% ISA then?

dunstonh

The changes that banned commission effectively can be summarised in one sentence. The RDR prevents providers setting the remuneration that advisers recieve and instead allow the adviser to set their remuneration with agreement from the client.

That is what it boils down to. The remuneration can still be paid the same way as before. Most products for the best part of the last decade were explicitly charged and not commission based. Now it is just official and mandatory. Nothing now. Different words, a few different forms here and there but more or less the same thing.

Robin_Jackson

Cheers - what would you do then DunstonH?

Robin_Jackson

Or you FeesAreFare? lol Im perusing opinions here fellas - help me out!

srcandas

Robin_Jackson wrote: »

Or you FeesAreFare? lol Im perusing opinions here fellas - help me out!

remember that most active posters here who are not in the industry would not pay either.

The professionals will not give an opinion because that is not what they do IMHO

Tough but it is your money and your choice.

One thought though is your pension is something like 15/20 years old and it has £35000 so how much do you pay in a year?

:beer:

ps and what feesarefare says but I didn't have the nerve to be so blunt