Ifa fees/charges

MOUNTY

I am looking to move my pension fund to another provider with lower AMC charges. I am due to visit my IFA and am concerned as to what charges are to be paid to the IFA . I am led to believe 3% of value of fund to be transferred will be charged.
Will deductions come from the total value of my fund or monthly direct debits taken from each of my chosen funds AMC.
If i am paying £180pm net into fund will it be used almost immediately to pay back the 3%?:(

jem16

MOUNTY wrote: »

I am looking to move my pension fund to another provider with lower AMC charges.

What are you currently paying and with what provider?

I am due to visit my IFA and am concerned as to what charges are to be paid to the IFA . I am led to believe 3% of value of fund to be transferred will be charged.

The percentage amount will depend on the value of your fund. For example if your fund is £35k, 3% of that would be £1050 which could be fair depending on the amount of work involved. However if the fund value was £100k, a fee of 3% would be too high.

What is your fund value?

Will deductions come from the total value of my fund or monthly direct debits taken from each of my chosen funds AMC.
If i am paying £180pm net into fund will it be used almost immediately to pay back the 3%?:(

There are different ways the fee could be taken so I'll leave that to the IFAs who post on here.

MOUNTY

At present with Friends Life. AMC 0.7 reduced by 0.2 as over 50k.
HL, AXA, SIPPDEAL are all 0%.
Monthly fund charges with FL are good (1%-1.25%)
IFA still recommends can get better deal elsewhere

jem16

MOUNTY wrote: »

At present with Friends Life. AMC 0.7 reduced by 0.2 as over 50k.

Is that the Personal Pension or Stakeholder Pension?

HL, AXA, SIPPDEAL are all 0%.
Monthly fund charges with FL are good (1%-1.25%)

I think you are misunderstanding the charges.

For example with the Friend's Life PP, Invesco Perpetual High Income is 0.5% (over £50k) plus fund AMC of 0.75% which is 1.25%. There are many interal FP funds which work out at only 0.5% AMC in total. Only the external funds have an extra AMC.

So if you are saying your funds are 1%-1.25% that's the total AMC you're paying.

HL would see an AMC for IP High Income of 1.5% minus loyalty bonus if DIY of 0.25%. However if using HL you need to compare the TER as that's what FL's AMC is. The TER is 1.69% minus 0.25% so 1.44%.

IFA still recommends can get better deal elsewhere

Better than HL etc or better than FL? It might well be possible but you need to understand the charges better before comparing.

dunstonh

IFA still recommends can get better deal elsewhere

He can.

HL, AXA, SIPPDEAL are all 0%.

FL have no charge either. Its on the fund just like those.

brasso

You could always consider doing it yourself i.e. starting a SIPP, transferring all your funds in and making your own investment decisions. You can be as risk-averse or as adventurous as you want.

I don't see why you should be paying an IFA a 4 figure sum, regardless of the size of the fund.

MOUNTY

Still not sure how fees/charges are to be deducted from my pension fund value or from my monthly dd's.
Value 83k
Monthly dd £180 net.

mania112

If you agree to 3%, you have the choice of either paying it up front to the IFA (cheque, bank transfer...maybe cash?!) or the IFA can take it from the value of the transferred monies. In which case the new provider will assign 97% to the new policy and remunerate Mr. IFA the remaining 3%.

A way to look at fees could be for the IFA to show you a projection to retirement that compares what you've got now to what you can move in to. This can include the 3% and perhaps still show a higher maturity value than where you are now.

What i'm trying to say is - you may think 3% is high (which it might not be for the work involved), but in the long run it might actually save you money.

And if it doesn't? You probably shouldn't do it!

So 3% comes off the £83k in your case - £2,490

bigadaj

mania112 wrote: »

If you agree to 3%, you have the choice of either paying it up front to the IFA (cheque, bank transfer...maybe cash?!) or the IFA can take it from the value of the transferred monies. In which case the new provider will assign 97% to the new policy and remunerate Mr. IFA the remaining 3%.

A way to look at fees could be for the IFA to show you a projection to retirement that compares what you've got now to what you can move in to. This can include the 3% and perhaps still show a higher maturity value than where you are now.

What i'm trying to say is - you may think 3% is high (which it might not be for the work involved), but in the long run it might actually save
And if it doesn't? You probably shouldn't do it!

So 3% comes off the £83k in your case - £2,490

Fair point but how would the ifa demonstrate this with any confidence. Growth rates are projections and the ifa certainly wouldn't guarantee them, so the only added value that could be demonstrated is a reduction in fees and charges on funds, platforms etc

mania112

bigadaj wrote: »

Fair point but how would the ifa demonstrate this with any confidence. Growth rates are projections and the ifa certainly wouldn't guarantee them, so the only added value that could be demonstrated is a reduction in fees and charges on funds, platforms etc

If you are comparing projections between old scheme and new scheme on the same basis (whether it be the FSA standard 5%/7%/9% annual growth or otherwise) and the maturity values are different, that can only be because the charges are different.

So, the projections are used to prove the costs.

If your current scheme let's say projects to £250k at 65 on 5% growth and I can show you a new pension that projects £300k at 65 on 5%, the new pension is cheaper. If that new projection includes the 3% fee, it's worth a transfer.

(long winded way of saying the projections don't matter, so long as they're the same).

mania112

Perhaps I should go on to the 2nd part of this:

Fund projections and past performance are actually not the primary concern when looking at a transfer. This is as per FSA guidelines.

Costs and features trump the performance.

It's obvious why, there's no telling how the fund will perform. How it's performed in the past is no guarantee of the future.

Costs are the most important reason to transfer a pension in my opinion (and in the opinion of the regulator).