Why different rates to transfer pensions?

Special_K10

Hi,
Some of my fellow employees have been in the company pension with Scottish Widows for quite some years. Now AE has come in, our employer has used the same FA to find a pension with lower charges. The FA's advice to the employees is to transfer their SW pension to the newer Scottish Life pension but it would seem that he is charging different amounts to different people and some of them are getting quite angry about this....but don't seem to have asked the FA why.

It appears to me that the employees are more concerned with how much the FA will 'make' rather than if transferring from SW to SL is better for them. The SL pension does have lower charges than the 'old' SW pension.

Please can I ask why the FA will be charging different amounts to different people? I assume that this is because he is charging a percentage and, of course, everybody has different amounts in their pensions?

dunstonh

The FA's advice to the employees is to transfer their SW pension to the newer Scottish Life pension but it would seem that he is charging different amounts to different people and some of them are getting quite angry about this....but don't seem to have asked the FA why.

Is he using a percentage charge? That is quite common.

Special_K10

I do not know that for sure, but guess that he is being as everybody's seems to be a different amount.

Please can I ask, in your opinion, what the average charge for transferring a pension of, say, £40k? or average percentage?

Laurajo_2

I believe that they have a legal obligation to tell you of any commission they make.

When we did this at our workplace, it was a percentage of the fund value that was charged.

Special_K10

Laurajo wrote: »

I believe that they have a legal obligation to tell you of any commission they make.

Thanks for that. Well he has obviously told them all that he is charging them because that's how they know that it is costing different people different amounts, you see.

Special_K10

Please can I ask, in your opinion, what the average charge for transferring a pension of, say, £40k? or average percentage?

dunstonh

I believe that they have a legal obligation to tell you of any commission they make.

There isnt commission. It is explictly charged. That is in part why the Scot Life plan will be cheaper.

Please can I ask, in your opinion, what the average charge for transferring a pension of, say, £40k? or average percentage?

Hard to say at it depends on a lot. A city firm is typically more expensive than a rural one. A high net worth firm would charge more for smaller amounts than larger amounts etc.

one regional accountant firm in our area charges everyone a flat £2400. Now that may be fine on £150k but not on £15k. A percentage fee works better for smaller cases as they benefit from the cross subsidy offset that the larger cases pay.

around £1000 for a £40k pension transfer is not bad going.

Special_K10

Thank you for that. Much appreciated.

I take it that it isn't unusual for employees to get upset that an FA even charges at all to transfer a pension?

Any thoughts on Scottish Life v. Scottish Widows?

jamesd

There is no need to pay a charge to transfer a personal pension. Some recipient places will even pay you for transferring to them, during promotions. Those destinations are the DIY places. Those DIY places can also be cheaper than the group personal pension providers.

What those of you who are concerned about can simply do is research the personal pension and SIPP market and compare the costs of various providers there. Then pick the cheapest destination that has a reasonable service level and suitable range of investments.

It would be necessary to pay this IFA for this IFA to do the transfer if you want to use them to do the work. But it's possible that the IFA when presented with an alternative that makes them nothing and involves them losing the commission they may be making on the existing Scottish Widows pension pots will choose to reduce the charge.

Special_K10

Thank you for that. However, I believe that the employers will not make their contributions to any other pension fund and have agreed to contribute to the stated SL one?

bilbo51

dunstonh wrote: »

There isnt commission. It is explictly charged. That is in part why the Scot Life plan will be cheaper.



Hard to say at it depends on a lot. A city firm is typically more expensive than a rural one. A high net worth firm would charge more for smaller amounts than larger amounts etc.

one regional accountant firm in our area charges everyone a flat £2400. Now that may be fine on £150k but not on £15k. A percentage fee works better for smaller cases as they benefit from the cross subsidy offset that the larger cases pay.

around £1000 for a £40k pension transfer is not bad going.

Is there more work involved with a larger fund transfer than with a smaller one?