Pension transfer fees - what is reasonable?

PJCMC

Hi, this is my first post so please forgive any glaring omissions or errors.

A bit of background - I have been a director in my own limited company for the past two years, during which time I have not made any pension contributions. I recently decided to rectify this and sought the advice of a (recommended) IFA.

I have a £53k pension pot from a previous employer scheme which I am looking to transfer and the IFA has completed his research and due diligence around my previous pension arrangements. He has now recommended that I transfer my pot into a managed SIPP (Standard Life WRAP). The past performance of this looks good and he completed a thorough assessment of my risk appetite etc but I am a little nervous about moving the lot over due to the fees.

My existing pension provider charges are 1.9% per annum. The proposed scheme's fee is 2.21% which doesn't bother me, however there is a 4% charge to complete the transfer (approx£2200).

My main question is - is this reasonable and appropriate?

Thank you in advance for any advice.

PJC

Your_Hero

PJCMC wrote: »

My existing pension provider charges are 1.9% per annum. The proposed scheme's fee is 2.21%

Not quite comparing like for like here I suspect. The 2.21% incorporates an ongoing adviser fee, probably at 0.75%-1%. So on pure scheme charges alone, it is a lot lower. But at 2.21%, you will be receiving ongoing advice and management from your IFA.

however there is a 4% charge to complete the transfer (approx£2200).

My main question is - is this reasonable and appropriate?

It depends how much work was involved in analysing your existing pension because it may have been a complicated plan - we don't know this. There is usually quite a lot of work involved for pension transfers even for what may seem like a simple case. The IFA also takes on a regulatory liability for the advice he's given to you. However, this is likely to be on the high end and you can probably ask him to reduce it.

SJD48

Oh my lord that's a hefty fee. As I said in another thread I've moved 3 old DC pots to a SIPP free of charge. Admittedly I have to make my own decision on investment from there but there are plenty of tailored funds to invest in and who's to say you won't select better than an IFA.

kidmugsy

PJCMC wrote: »

My existing pension provider charges are 1.9% per annum. The proposed scheme's fee is 2.21% which doesn't bother me,

Yow must be considerably richer than me. I'd have conniptions at the idea of paying 2.21%.

Suppose your investments return 3% p.a. above inflation. You plan to chuck away more than 70% of that. Over umpty-um years it will have a much bigger effect than the 4%.

Are you sure you're cut out for business?

DonM

kidmugsy, there is no need to question PJCMC's business acumen. We have no idea what (s)he deals in and being good at their field does not mean they will naturally be good at finance.

Anyway, if paying 4% upfront and 2.21%pa yields higher returns then it will be worth it. I just have my doubts.

The first question you should be asking is it possible to move to better funds within your own pension. This would be the best solution if possible. Unfortunately when it comes to investments I have seen apparently good FA's, who are great at legal points such as trust advice, give terrible advice.

To help further, what funds and splits have you been advised?