Pension Choice Nightmare

RVS6

Hi
I am in the process of trying to move my pension and I amfinding it a nightmare comparing the options and making a decision! The plan is currently with Skandia but is nonRDR friendly so I cannot increase payments into it. I have always been wary of the charges andalso want to move IFA. My pot is circa£80k and I currently pay a 1.25% AMC + approx fund charges of 1.28%. I did consider managing a SIPP myself, but Ireally don’t have the investment savvy nor the time to do this, so I amprepared to pay for advice and management.
The options I have looked at thus far are:
1. St James Place – I am somewhat wary about theseguys due to some threads I have read on line and the fact that they are tied,but the adviser seems genuine and the charges on the face of it appeartransparent with an AMC of 1.25% on the pot value + fund charges (and thiswould include cash flow modelling). Theyquote me a reduction in growth/yield of either 1.8% or 2.0% depending uponwhich portfolio I go with. I don’t muchlike being tied in for 6 years, but I understand that the transfer/initialadvice fee is spread out over the first five years so I can understand why theydo this.

2. Hargreaves Lansdown – this is for what they calltheir discretionary fund management offer with ongoing advice/annual review, ontheir SIPP platform. Charges are 1.77%AMC (incl funds) + 0.44% ongoing servicing charge, and a transfer/initialadvice fee of 2%. The quoted reductionin yield/growth is 2.4%. The proposalonly allows for a written annual report and a telephone review, and does notallow for any specific cash flow modelling.

3. Local IFA proposal – this is based on theStandard Life SIPP via the IFA’s own wrap. The charges are 1.3% from Standard Life + 1% ongoing advice charge fromthe IFA, and the IFA wants 3% as the transfer/initial advice fee. The reduction in yield/growth comes out at2.6%. They come across as professionaland are chartered financial planners, but the proposal seems rather on the highside for fees. They did look at keepingthe Skandia platform, but advised that the S/L one provides betterfunctionality etc.
I really want to sort out my pension and get my payments inincreased, but I really don’t know which way to go. I had previously looked at another couple ofoptions, but for various reasons discounted them. There is one other that I may look at from anotherlocal chartered IFA company who tend to use passive investments, so not sure ifthat is a good idea or not (albeit I believe they are gaining popularity). A bit of anightmare really. I don’t know what the “accepted”going rate is for pensions advice and management (probably isn’t one), and Ihave done a fair bit of research. Iappreciate you get what you pay for, but how high should overall charges go beforeit is unacceptable? I just look at theillustrations and see the huge impact charges can have on the overall pot – it’sscary. It may well drive me insane inwhich case I won’t need a pension!! So Ineed to dither no longer and bite the bullet…somehow!
I would appreciate any comments forum members have on theabove and the general topic. I cannot bethe only one out there to have suffered this dilemma.
Cheers

RVS6

dunstonh

1. St James Place – I am somewhat wary about theseguys due to some threads I have read on line and the fact that they are tied,but the adviser seems genuine and the charges on the face of it appeartransparent with an AMC of 1.25% on the pot value + fund charges (and thiswould include cash flow modelling). Theyquote me a reduction in growth/yield of either 1.8% or 2.0% depending uponwhich portfolio I go with. I don’t muchlike being tied in for 6 years, but I understand that the transfer/initialadvice fee is spread out over the first five years so I can understand why theydo this.

SJP are slick and do a good presentation and there is nothing technically wrong about them. You just pay through the roof for it.

2. Hargreaves Lansdown – this is for what they calltheir discretionary fund management offer with ongoing advice/annual review, ontheir SIPP platform. Charges are 1.77%AMC (incl funds) + 0.44% ongoing servicing charge, and a transfer/initialadvice fee of 2%. The quoted reductionin yield/growth is 2.4%. The proposalonly allows for a written annual report and a telephone review, and does notallow for any specific cash flow modelling.

Discretionary management on a pot of your size is, in my opinion, a waste of money.

3. Local IFA proposal – this is based on theStandard Life SIPP via the IFA’s own wrap. The charges are 1.3% from Standard Life + 1% ongoing advice charge fromthe IFA, and the IFA wants 3% as the transfer/initial advice fee. The reduction in yield/growth comes out at2.6%. They come across as professionaland are chartered financial planners, but the proposal seems rather on the highside for fees. They did look at keepingthe Skandia platform, but advised that the S/L one provides betterfunctionality etc.

Are you on the Skandia platform or the Skandia Life product? The Skandia platform can be incremented and you can top up pre RDR contracts. Personally, I prefer SKandia platform to Standard Life platform but platform choice is largely personal opinion. This IFA is quite expensive up front.

RVS6

Thanks dunstonh

I was always worried that SJP were expensive, but they seem to be comparable here, but I am going to ask them a few more questions - they should be able to confirm the fund TER based on the portfolios they are suggesting which + their adviser/servicing charge should give the total.

Point taken on the pot size and DFM with HL.

Agreed that the 3% up front cost for the local IFA is a bit on the high side and I will attempt to push this down a bit, but to be honest it is something I would let go if it meant getting my pension sorted. They have advised today that Standard Life are reviewing their charges downwards and are due to announce new proposals this week which might push down the total costs to 2% which I think I could live with

dunstonh

New Std Life pricing is just released. http://www.citywire.co.uk/new-model-adviser/standard-life-unveils-new-wrap-charging-structure/a708479?ref=new-model-adviser-latest-news-list

Nothing there to make me want to use them as the pricing is still high.

RVS6

Thanks, the IFA has advised on the revised pricing and they have also advised they have secured a further reduction direct with S/L taking charges down to 2.15% total on their proposal. Does that still sound high? I know you get what you pay for to some degree - I am not keen on a totally passive portfolio so I know the fund charges will be higher, and I want an IFA who will be pro-active.

atush

3% upfront, and 1% going forwards is too high together.

I'd expect a lower upfront for ongoing at 1%, or a reduction to the ongoing of .5%.

If he wont go down, have you thought of trying another local?

Sobryma

To add to your confusion -
You could look to Bestinvest Managed Portfolio option. This is available from £50k and is more competitive on charges - mine is around 1.8% TER with no initial charge but no cash flow modelling. As they have ISFL funds you also see past performance.
I also believe Charles Stanley offers a similar service.

dunstonh

This is available from £50k and is more competitive on charges - mine is around 1.8% TER with no initial charge but no cash flow modelling.

That is not competitive for a non-advice service. If you consider that most clean funds are priced around 0.2% to 1.2%, then that means there appears to be quite a lot of charges added to yours to get a 1.8% OFC

3% plus 1% on £80k is £2400 up front and £800p.a. The 1% p.a. I can understand. The workload on servicing is ever increasing and nowadays can be almost as much as putting it in place to begin with. So, a tapered ongoing charge that starts at 1% for smaller funds and then drops as the fund gets bigger is increasingly common nowadays. The 3% is the heavy bit here. £1000 or so would be a figure to look for. £2400 in itself is not greedy. but it is at the top end of what would be considered acceptable to many.

There is a regional accountant in our area that charges £2400 flat. For some cases that would appear really expensive but for others it would appear very cheap. So, there are different models that can suit different transactions and values but not others.

bigmatt1174

I personally do not think that 3% + 1% is too far overpriced - I am not an IFA but form part of the people who control the IFA population (well in my network anyway) and 3% + 1% would be average (well the 3% bit). It is probably far less than you would have paid pre 31/12/2012, as on a Pension Switch commissions could have been as high as 7% plus an on-going trail.

Now with RDR you can see exactly what you are being charged and also the IFA will have to justify the 1% - if anything I would say the 1% is on the high side - what are you going to get for the 1% - how many visits per year will the IFA offer - 2, 3 or 4? What else is offered for the 1% - this will have far more impact on the growth of your pension than dropping the initial charge to say 2%.

On-going servicing is a hot topic and we are monitoring what our guys do and if they are not following what they say we are making them re-evaluate their propositions!

Sobryma

dunstonh wrote: »

That is not competitive for a non-advice service. If you consider that most clean funds are priced around 0.2% to 1.2%, then that means there appears to be quite a lot of charges added to yours to get a 1.8% OFC

It's not non advice as such.....

For the fee Bestinvest help you select the risk model which drives the portfolio. I'm not certain how bespoke the managed portfolio's are but mine differs to their ISFL funds or MAP portfolios - I previously had an advisory version which was reasonably bespoke. The BI management charge is 1% + VAT with no initial charges - underlying clean funds are costing ~0.6%, for that fee they manage fund choice, asset allocation within model and switches as appropriate (so if their house view of a fund downgrades they will replace it).

I have had a look around and I thought it seemed reasonably competitive, most IFA's that I could trace seem to require an initial charge although annual management charges sometimes were lower.