IFA with a straw in my pension fund

Pixie5740

I became a self-employed contractor about 18 months ago so I decided to start up a private pension. I did a bit of my own research and then went to see an IFA for some advice because I really didn't want to !!!! this up.

The IFA's remuneration for setting up this pension was 30% of the regular premiums paid into my pension in the first year and then 0.25% of the fund value will also be paid to them annually by the pension provider to cover the cost of ongoing reviews. I suppose of the IFA is reviewing my pension fund then it's only fair that they receive some remuneration but it just sounds a bit like the IFA has a their straw in my pension fund and will be happily sucking away for the next 35 years.

What experiences have other MSE forum users had with IFAs and pensions? I must admit that I'm rather green when it comes to all this stuff.

JoeCrystal

Well, how much was the regular premiums? That would give us a better idea on how high it is. Do you also have pension's AMC as well?

In my case, it was just one off transaction to set up a personal pension scheme. Cost me a fee of £300 plus 1% commission on my monthly premiums forever (but not on single lump sum). This is with £3600 net lump sum and £156 net per month. No review though.

Cheers,
Joe

dunstonh

I suppose of the IFA is reviewing my pension fund then it's only fair that they receive some remuneration but it just sounds a bit like the IFA has a their straw in my pension fund and will be happily sucking away for the next 35 years.

You are self employed. You should know better really. You expect to be paid for work done. So, why do you not want someone else doing the work to be paid?

What experiences have other MSE forum users had with IFAs and pensions? I must admit that I'm rather green when it comes to all this stuff.

IFAs handle around 70% of uk regulated retail pension transactions. With just 1% of complaints at the FOS, of which the majority are rejected, the situation is very good.

Effectively, your choice is to DIY or use an IFA. If you use an IFA you will pay for them. If you DIY then you do the work yourself.

Pixie5740

JoeCrystal wrote: »

Well, how much was the regular premiums? That would give us a better idea on how high it is. Do you also have pension's AMC as well?

Thanks Joe. My regular premiums are £600 a month. What is the pension's AMC?

Pixie5740

dunstonh wrote: »

You are self employed. You should know better really. You expect to be paid for work done. So, why do you not want someone else doing the work to be paid?

In my post I did say that it was only fair that the IFA received remuneration for their services. I'm just trying to gauge how their remuneration compares with other IFA's for a similar service.

dunstonh

for ongoing servicing it can range from 1% for small values up to 0.25% for very large ones. 0.50% is by far the most common figure over £100k.

The initial is not overly competitive. You could have got less than that (probably half). However, it is by no means at the top end. e.g. one major accountancy firm in our region charges £2400 flat irrespective of transaction.

Pixie5740

Thank you dunstonh. Since moving to where I am I've found everything from bus fares to housing cost more than where I came from so I'm not surprised to hear that he inital does not sound overly competitive. The IFA remuneation seems about right so I'm happy with that.

What with moving cities, selling property and becoming self-employed I'm not sure DIY would have been the best option for me as I wouldn't have had to time to research it all properly and would either have ended up without a pension at all or got it catastrophically wrong.

In a past life I spent a few months working for the Clydesdale Bank and my time there made me wary of financial advisors although I suppose an independent IFA is somewhat different to a FA at a bank.

dunstonh

City based firms tend to cost more than rural ones.

In a past life I spent a few months working for the Clydesdale Bank and my time there made me wary of financial advisors although I suppose an independent IFA is somewhat different to a FA at a bank.

Very different.

The FOS stats confirm that as well. Just published yesterday Chief ombudsman Natalie Ceeney said: "For the second year running the proportion of complaints the ombudsman received about IFA's remains exceptionally low at just 1% of the total. This is also reflected in the number of complaints we upheld about IFAs, which has dropped by 12%. We know that the vast majority of IFAs are committed to providing excellent service to their customers - and where complaints do arise, our technical advice team can help sort things out without the need for the ombudsman to get involved."

IFAs dominate the retail distribution of regulated retail products. In the case of pensions, they do over 70% of them. So, that 1% is not bad. Nothing is perfect. I can't claim that. However, it is one area of financial services that is not considered toxic.

jamesd

dunstonh, a doubling of complaints about IFAs last year isn't really what I'd consider to be good news, even though the uphold rate dropped from 54% to 42%.

It only stayed around 1% because of a huge increase in some other types of complaint, notably PPI.

dunstonh

dunstonh, a doubling of complaints about IFAs last year isn't really what I'd consider to be good news, even though the uphold rate dropped from 54% to 42%.

4139 complaints at the FOS against the major distribution channel that handles millions of transactions every year is tiny. A lot of the increase is placed at the hands of claims companies putting in try-it-on complaints. Some of whom automatically refer their cases to the FOS regardless of reasons or chances of success. Delayed cru complaints are likely to be factored into that as well but we wont know until later data is made available. Also, a number of IFAs will includes mortgages and PPI complaints (some networks have more mortgage advisers than IFAs but fall under iFA classification)

IFAs accounted for 21% of complaints about pensions. Yet handle over 70% of pensions.

When the figure is very small to begin with, any increase/decrease is going to show as a larger figure. However, the actual figure is more important. The FOS consider it good news and "exceptionally low".

elantan

What I can't get my head around is ... Yes you pay for them to sort the situation an that is only right they should be paid, but why do you have to pay money for the rest of the time that you have the policy/ plan ... It. Not like you pay the Plumber every time you flush the toilet just because he fitted it or you ? Or the electrician a fee every year cause your lights are still working

If you were to go back and see him/ her again then you should pay again for the work he/ she does