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Not happy.

I've just recieved my Annuity details. I was going to go it alone with quotes etc. But I decided to let my IFA from the office that was dealing with my pension find me a quote. It's all gone through, but on the details sent me by my provider I see that they have paid the IFA 10% [£1,340 on £34,000] of my total fund value in commission. At no time during his two brief visits did I see this figure.
Is this the industry norm.
Also I have a small pension that I've had released. It was standing at a fund value of £2000 in 1998. They stopped investing it in 1998 but continued to take management charges. It is now worth £1600 due to the deduction of charges. Is this acceptable?
Thanks for any thoughts, info.

Jim.
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Comments

  • how is £1340 10% of £34,000?
  • mark55man
    mark55man Posts: 8,143 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    it would be normal for a fund at that level (£2K) to bobble along at about that level as increases would be around the same as charges, and the last 5-10 years have been really up and down but ending up just about where they started


    can't help you with the 10% business other than to note on the numbers you quoted its like 3-4%
    I think I saw you in an ice cream parlour
    Drinking milk shakes, cold and long
    Smiling and waving and looking so fine
  • Sorry, sorry. Of course it's not 10%. Doohhh
    posted too quickly.
    Of course the percentage is wrong. but the actual figure is correct and it just seemed a lot.
  • POPPYOSCAR
    POPPYOSCAR Posts: 14,902 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    How did you think he was going to be paid for his advice?

    What did you agree with him?
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    The IFA is supposed to, under new rules give you a figure up front on costs. As side note, what was the best quote you got for your (small) pension pot? Did he do better?

    Second, as to the small pot, no that isn't how it should be (ie 2K gone down to 1600) what were you invested in?

    Why didn't you merge it with the one you are getting the annuity for?

    you could do a stranded pots release of the full LS, depending on your age.
  • dunstonh
    dunstonh Posts: 118,617 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    but on the details sent me by my provider I see that they have paid the IFA 10% [£1,340 on £34,000] of my total fund value in commission.

    IFAs cannot be paid commission when giving advice. (and its not 10% but you already know that). IFAs also have to agree the fee in advance.

    Are you sure this is an IFA? (and actually operating as an IFA and not using some direct/non-advised option)
    Is this the industry norm.

    Advisers are paid a fee. It is how they earn the money. A fee of £1340 is right in the ballpark you would expect. Only non-advised (DIY) cases can pay a commission and that is deducted in much the same way and the commission would be largely the same (most take around 3.5%)
    Also I have a small pension that I've had released. It was standing at a fund value of £2000 in 1998. They stopped investing it in 1998 but continued to take management charges. It is now worth £1600 due to the deduction of charges. Is this acceptable?

    It is acceptable if that is the contract you agreed. On old pensions, the first couple of years used to go in charges. If you stopped paying into it early, the provider would often take the outstanding fees from the pot. There were different ways to do that (e.g. capital/accumulation units or an increased annual charge for a defined period).
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • The advisor came in at about the same as an online quote. I went for the trust thing rather than an online stranger that may have had hidden fees and to be honest probably a little laziness.
    It is an IFA managing an old Dunbar policy. Now Scottish Mutual. If the fee is in the ballpark then fair enough.
    The £2000 pot was a Group person pension. With Profit Fund. I stopped contibuting when I left that employment. I could not transfer as I was not contributing to the bigger pension at that time.
    It is a bit annoying how the pot has declined so much in value due to management charges. One wonders what they are managing as it just appears to have been stood still?
    Thanks for your answers. Appreciated. Great forum.

    Jim.:)
  • mania112
    mania112 Posts: 1,981 Forumite
    Part of the Furniture Combo Breaker
    It's misuse of the new RDR rules in my opinion.

    IFA's have their own payment models, and this guy has a model which says for an Annuity purchase, you will pay £1,340.

    But, in my opinion, that's hurting the client. A 3% of purchase price is much more suitable.

    Sure that means someone who has £300k pays alot more for almost the same service, but Mr. £300k is a bigger liability on the IFA and Mr. £30k is arguably in more need of a higher rate.

    This comment will spark a long fee debate, but suffice to say my ball is in the court of this Annuity purchase fee being too high.

    Sidenote: You should definitely have been told the fee too.
  • dunstonh
    dunstonh Posts: 118,617 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    The advisor came in at about the same as an online quote. I went for the trust thing rather than an online stranger that may have had hidden fees and to be honest probably a little laziness.

    This "adviser" is not doing it on advised basis. Commission cannot be paid on advised basis. The providers wont allow it either (their applications state advised/non-advised and fee/commission)
    This comment will spark a long fee debate, but suffice to say my ball is in the court of this Annuity purchase fee being too high.

    The fee is fine in monetary terms. If it was the same percentage applied to a larger amount then I would largely agree. However, anything between £1000-£1500 is what you would expect.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    sun-n-moon wrote: »
    I decided to let my IFA from the office that was dealing with my pension find me a quote. ... I see that they have paid the IFA 10% [£1,340 on £34,000] of my total fund value in commission.
    It's something you really should have done before but check whether the "IFA" checked the whole market. That is, that it wasn't some restricted deal from some pension company but a real IFA providing a real advised service.

    What can happen is that a pension company will have a restricted range of annuity providers that they refer people to and these usually offer poor deals compared to the whole market, with their own "advisers" doing the selling rather than providing full advice. Sometimes this could be done via IFA firms providing execution only unadvised sales. If it was a real IFA providing advised service this would not happen.

    So in a friendly way, not accusatory at all, just ask about whether it was a fully advised sale checking the whole market or whether it was restricted in some way.

    Is this a standard annuity or an enhanced annuity? Do you have any health issues that might reduce your life expectancy? Things like smoking, high blood pressure, diabetes. Anything that reduces life expectancy can increase the amount paid by an enhanced annuity. An IFA would normally automatically ask about these things when making an advised sale because they can make a big difference to the payout level.
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