Advice on company pension

huwy123

hi there,
I'm hoping for some quick advice on our company pension scheme. We have approx 45 staff of which 20 are currently enrolled. we pay in around 3k a month (in total for all staff).
With auto-enrolment coming we are reviewing our scheme.
Our current one is with Friends Life (FL Balanced Index Fund of Funds). We are going through an IFA company and pay 1% management charge with Friends Life and a further 0.5% to the IFA company.
This seems a lot to me so I'd like to get some other options.
Can anyone advise where to look for a competitive quote? I appreciate this is a complex subject!
Cheers,
Huw

dunstonh

Our current one is with Friends Life (FL Balanced Index Fund of Funds). We are going through an IFA company and pay 1% management charge with Friends Life and a further 0.5% to the IFA company.

Are you sure that 1% management charge is in addition to the IFA charge? I have used FL and used that fund and FL paid the 0.5% adviser remuneration out of the annual management charge. Not in addition to it.

It may be that yours is an older scheme and is obsolete compared to modern ones. However, typically you would expect under 1% nowadays on an auto enrollment style scheme. Typically around 0.4% plus adviser charge for internal investment options.

Can anyone advise where to look for a competitive quote?

A local IFA or whole of market adviser should be fine.

huwy123

Thanks for coming back.

I can confirm the total charge is definitely 1.5%. As I said this seems like a lot!

I was wondering if its better to go direct to a company than pay a monthly management charge to an IFA.

-H

InvestmentAdvisor

I do this for a living and can confirm that 0.5% is not expensive. You are both correct on how you are being charged. dunstonh you are being charged on the old 'pre RDR' regime which is no longer used. Huwy, you can pay that 0.5% though the pension payments. there should be an upfront cost too?? We allow clients to pay through the contributions so the company doesn't have a charge if they prefer.

dunstonh

I can confirm the total charge is definitely 1.5%. As I said this seems like a lot!

This must be one of their older contracts then as there more modern ones using the same fund and same adviser charge would come out less than that.

I was wondering if its better to go direct to a company than pay a monthly management charge to an IFA.

Typically not. The direct to provider option is typically more expensive than the IFA option. DIY is a possibility through a discount broker. That will be cheaper than both of the others. However, DIY does mean you have to do your own research and own paperwork. If you are up to that then that is fine. If not, then its like any type of DIY. Do it well and you save money. Do it badly and it can be a lot more.

If you dont feel DIY is right for you then get a local IFA or whole of market adviser to quote a modern plan. What you have is expensive compared to modern options.

huwy123

Thanks for the advice. I appreciate the help.

I guess another consideration is whether there would be a charge to move to another provider - is that common?

Cheers again.
-H

dunstonh

I guess another consideration is whether there would be a charge to move to another provider - is that common?

Depends on the scheme and the values and the model of the firm used. There may be a fee to transfer it but no-ongoing charge. Or it may be that the firm operates a servicing model and charges little or nothing for changing the contract as they make their money on the ongoing servicing side.

Even if there is a fee, remember that if you can get 0.40% instead of 1.5%, then it wouldnt take long to break even and move into profit.