DIY Pension or use Advisor

Jonah01

Hi,

Have seen a financial advisor who has pointed me in the direction of a particular pension fund.

I am quite new to this so was wondering as I am just going for a standard pension without too much risk do I need the services of an advisor?

He wants to charge 1k to set it up and then a 1% annual charge. On top of this there is a annual charge of 0.9% from the pension provider.

Obviously he will be able to monitor the fund and other products for me which accounts for his 1% but it is the pension provider who will be managing the actual details and the investments within it not him .

Can the products recommended by him be accessed by the public?

Do people do this type of thing without an advisor?

Thank you.

Sobryma

It's not clear what level of investment you are making from your post, and that is clearly a factor. The charges for an IFA you quote don't look crazy but clearly if you are paying in £10k will be out of proportion to £100k or more.

You can DIY via a platform pension or SIPP; with a bewildering range of fund choices - some offer default funds (or model portfolios). You can also setup your own Personal Pension or Stakeholder if you want - most will give a default option and good fund ranges which may or not be be suitable. Clearly this avoids adviser fees but you don't get any advice either.

Advisor may be able to access some exclusive funds such as Dimensional or Discretionary management but generally access is fine if you are happy to DIY.

Jonah01

Hi,

Thanks for your help.

The initial investment would be 15k followed by monthly payments.

I don't mind paying an advisor but am just wary of paying for something that is very simple and that I could do myself.

The pension is through Scottish Life (type - Pension Portfolio). It isn't indexed linked and instead the funds are managed. (if i have worded that correctly). The pension is moderate risk.

kidmugsy

Jonah01 wrote: »

He wants to charge 1k to set it up and then a 1% annual charge. On top of this there is a annual charge of 0.9% from the pension provider.

And then on top of that there might be annual charges on the funds the provider puts the money in. Personally I'd run a mile. I'd either (i) spend some time at the monevator blog, and then choose a "platform" and a range of cheap passive mutual funds, or ETFs, and do it myself, rebalancing once per year, or (ii) I might start off with an Investment Trust pension, while I learn enough to try (i) in addition. See p51: J P Morgan looks decent value. On p58 you'll see the list of the companies they manage that you can hold in the pension: plenty of scope there to diversify.
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats30Jun14.pdf

Your costs then would be 0.25% p.a., subject to a cap and a collar, plus the trading costs when you buy shares, plus the companies' own charges, which you can find from the aic website.

If their literature turns you off, then it's back to (i).

dunstonh

I am quite new to this so was wondering as I am just going for a standard pension without too much risk do I need the services of an advisor?

Like any job you need doing, you can DIY or get someone else to do it for you. DIY could be cheaper if you do it right but it could be more expensive (as not all DIY options are cheaper). Plus, if you make a mistake it could turn out far more expensive.

He wants to charge 1k to set it up and then a 1% annual charge. On top of this there is a annual charge of 0.9% from the pension provider.

The initial advice and the ongoing advice are two separate things. You can have one or the other or both. So, if you dont think you need ongoing servicing then you dont have to pay that bit. However, advisers will typically use different investments for those not selecting ongoing servicing to reflect that.

Obviously he will be able to monitor the fund and other products for me which accounts for his 1% but it is the pension provider who will be managing the actual details and the investments within it not him .

The fund manager controls the investments in the fund but the pension provider does not select the funds or allocations and will not recommend any changes. The adviser does that.

Can the products recommended by him be accessed by the public?

Some do. Some dont. Some offer no cost benefit, others will.

Do people do this type of thing without an advisor?

Some do. Some dont. Like any DIY, it depends on your ability and willingness to do it.

The initial investment would be 15k followed by monthly payments.

I wouldnt bother with ongoing servicing.

The pension is through Scottish Life (type - Pension Portfolio).

Good quality option. Not available direct. However, I woudlnt be inclined to use this adviser with your fund value. You just dont need it with the small pot you have.

On top of this there is a annual charge of 0.9% from the pension provider.

0.9% is the starting cost for small values but it is reduced in tiers and ends up half that above certain fairly low tiers. Its a good low cost option. Not the cheapest on the market for most but almost is. However, it has very good fund governance and some excellent options for non-servicing cases.

Jonah01

Excellent post thanks.

The initial advice and the ongoing advice are two separate things. You can have one or the other or both. So, if you dont think you need ongoing servicing then you dont have to pay that bit. However, advisers will typically use different investments for those not selecting ongoing servicing to reflect that.

In reality what would the advisor be doing on a yearly basis for his 1%? With such a small pot I hear what you say. I may ask him.

Does the initial fee sound appropriate of 1k?

So basically I can start this off pay my 1k and 0.9% every year and Scottish Life will do the best they can for my pension to make it grow while sticking to my risk assessment.

I suppose I can always turn on the annual servicing later down the line?

Thanks

kidmugsy

Why not do your homework at monevator, with the intention, say, of using one of the the Vanguard life-style funds?

Subtract your age from 110 as a guide to the proportion of equities to go for. Vanguard does all the rebalancing for you.


At least compare the cost of that option against the Scottish Life option.

dunstonh

In reality what would the advisor be doing on a yearly basis for his 1%? With such a small pot I hear what you say. I may ask him.

Ongoing servicing typically means no charges for any work you generate with the adviser. It would frequently include a review of the existing plan to check ongoing suitability. A check of the existing investments for ongoing suitability and a recommendation to make any changes where required. On £19k, I wouldn't bother (I wouldn't even offer you it personally).

Does the initial fee sound appropriate of 1k?

yes. Right on the expectation.

o basically I can start this off pay my 1k and 0.9% every year and Scottish Life will do the best they can for my pension to make it grow while sticking to my risk assessment.

yes

I suppose I can always turn on the annual servicing later down the line?

Yes. you can also do ad-hocs (say pay an amount every 3-5 years until you get above around £75k)

Jonah01

kidmugsy - I will take a look but to be honest I am a novice at pension stuff.

dunstonh - Thanks. I have asked the advisor if the ongoing servicing is compulsory.

If he says it is I assume my best course of action is to find another advisor.

kidmugsy

Jonah01 wrote: »

kidmugsy - I will take a look but to be honest I am a novice at pension stuff.

Fair enough; we all were once. Just note the cheaper options for future use.

dunstonh

dunstonh - Thanks. I have asked the advisor if the ongoing servicing is compulsory.

The answer to that should be that it is not as it is a requirement that it is your choice. The only thing that would change is that the investments recommended would be those that require little ongoing servicing (e.g. a governed portfolio or multi-asset fund) rather than a bespoke portfolio that needs ongoing rebalancing and reviews.

If he says it is I assume my best course of action is to find another advisor.

yes as it would not be factually correct.