Why different rates to transfer pensions?

dunstonh

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

Transferring a pension is a lot of work and carries increased liability compared to putting new money into a pension. I am sure the employer gets upset he has to pay his staff for doing work too but he still does it

Any thoughts on Scottish Life v. Scottish Widows?

Scot Life every time (based on current contracts).

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?

That is normal. Most employers dont want a bunch of individual pension direct debits going out to different people. They wont a single scheme and single administration point.

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

Potentially yes. Liability is higher and larger funds are more likely to require more investment selection requirements. However, I suspect the job has been priced on the basis of the total amount of the group pension (i.e. all members) and the a percentage of that total figure used to ensure it is a profitable transaction to do. That percentage is then applied to each member.

jamesd

Special_K10 wrote: »

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?

You can continue to make new payments into the SL one.

It is also worth asking whether you can periodically transfer out from the SL one to another if you want to, perhaps no more than once a year or no less than £5,000 at a time if they care about those things. The ability to transfer out is useful to get a broader range of investments as well as costs that might be lower than at SL.

You can transfer the SW one to a different place if you want to. It doesn't have to be to SL and it doesn't have to be done by this or even any IFA. If you have questions you might consider phoning Hargreaves Lansdown and asking them about what they would need to transfer the SW pension to them.

HL can be cheaper for some types of investments, or more expensive for others. Not usually cheapest but can be cheaper than some group personal pensions. probably cheaper options but I'm mentioning them because I'm sure that the will be willing and able to answer your questions on the phone.

dunstonh wrote: »

I suspect the job has been priced on the basis of the total amount of the group pension (i.e. all members) and the a percentage of that total figure used to ensure it is a profitable transaction to do. That percentage is then applied to each member.

What happens to the economics of that when the members with the largest pension pots discover that they can get lower prices elsewhere and transfer from SW elsewhere instead of into SL?

Special_K10

Hi,
Thank you. Yes they can transfer to other providers other than SL but they will then lose out on the employer's contributions.

Please can I ask what Dunstonh meant by 'liabilities'?

doughnutmachine

Special_K10 wrote: »

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.

As a matter of interest what is the differences in charges between SW and SL? How much does the FA want? Could you not send an ultimatum to SW to lower their charges or you all move your pensions?

jamesd

Special_K10 wrote: »

Yes they can transfer to other providers other than SL but they will then lose out on the employer's contributions.

Why? The employer still gets to make their contributions into the SL pension even after the SW one has been transferred. The place SW gets transferred to doesn't do anything to prevent them from continuing to do that.

Special_K10 wrote: »

Please can I ask what Dunstonh meant by 'liabilities'?

One of them is being found to have offered incorrect advice and being liable to pay redress to those advised to transfer to a scheme that is not appropriate for their needs. Inappropriate investment choices if investment recommendations are made.

dunstonh

Please can I ask what Dunstonh meant by 'liabilities'?

Advisers, unlike other professions, carry their liabilities for their business to the grave. So, long after they are retired, they still have liability for the advice they have given. Typically that means continuing to pay liability insurance in retirement and having to deal with complaints in retirement, still suffer past reviews of business, and suffer any potential redress payments in retirement.

Liability is a business risk that has to be factored into costs.

What happens to the economics of that when the members with the largest pension pots discover that they can get lower prices elsewhere and transfer from SW elsewhere instead of into SL?

In reality, that wont happen often and they have probably used a conversion ratio of x% knowing that not all will transfer over.

Special_K10

Also, please forgive my naivety, but a friend stated that when he transferred his pension with this adviser, he had to sign something that said that, in basic terms, if the new SL pension was to fail miserably, that he would not be held liable for it. This is standard practice?

doughnutmachine

Special_K10 wrote: »

Also, please forgive my naivety, but a friend stated that when he transferred his pension with this adviser, he had to sign something that said that, in basic terms, if the new SL pension was to fail miserably, that he would not be held liable for it. This is standard practice?

If I was paying someone for advice and he wanted me to sign a waiver like that I would be very wary.

rpc

Special_K10 wrote: »

Also, please forgive my naivety, but a friend stated that when he transferred his pension with this adviser, he had to sign something that said that, in basic terms, if the new SL pension was to fail miserably, that he would not be held liable for it. This is standard practice?

Did it really say that or was it something like "investments can go up and down, future performance is not guaranteed"?

Linton

doughnutmachine wrote: »

If I was paying someone for advice and he wanted me to sign a waiver like that I would be very wary.

You would be right to think carefully - the chances are that he is telling you that in his view what you want to do is a bad idea and that if you insist on doing it he doesnt want to be held responsible.