Need advice in transferring my pension?

leumas

Hi,

I've recently changed jobs - in my previous role my employer and I paid into a Fidelity pension and over the 3 years it's built up to a total of about £12k. In my new role (a startup) my employer doesnt contribute to a pension (yet), and I can't continue to pay into my previous Fidelity pension.

So I need to transfer the pension into a new personal pension, and when I read through the pension page on this site (very useful) it seems I can either go it alone if I know what i'm doing (I will admit that I don't) or see an IFA about transferring my pension.

I went to see an IFA last week and they said they charge £420 to review the current pension plan (which they are apparently obliged by law to do before any transfer) and then it's a further 3% of my pension if I wish to transfer into the plan that they recommend for me (and then a further ongoing fee of 0.75% of the investment per year if I want their ongoing management of the fund).

I'm not sure how expensive this is compared to other IFA's (I intend to shop around though spending an hour with each is quite time intensive) but their total charge will work out at about £800 which is about 6% of my pension and just seems a lot to wipe off in value. I totally understand that they need to be paid for their advice and time by the way, I'm just talking about whether it's worth spending that much of a percentage of my pension to transfer it.

Could anyone advise on what may be my best course of action here, with my current pension value am I best going down the IFA route or would it not be cost effective? And if I dont, what is my best alternative without having to put in lots of effort into finding a good pension myself?

pipkiksass

I'd shop around with other IFAs; however they will all probably charge a fair bit. The thing about pension transfers is that they are compliance-intensive, and the IFA has to prove to the FCA that they have given you a fair comparison of the benefits of transferring into a new plan, etc.. That's the service you're paying for.

In terms of going it alone, it's not as tricky as it sounds. I set up my current pension through Cavendish Online. Rather than factor in ongoing management charges to your pension fund, they charge a one-off initial setup fee, then rebate the trail charges they would otherwise be entitled to into your fund.

Their website has a pension transfer section, with some useful advice.

Having said that, you will likely already have made decisions about the funds in which your pension is invested when you joined Fidelity. As a result, you may be able to continue to invest in the same funds if you stay with Fidelity... but possibly pay more charges.

Personally, I would go it alone (and have done so!). The providers want your money, so they will bend over backwards to help you. And they shouldn't charge for the privilege, as (once you've chosen your provider and product) they are only executing your request.

Edit: Sorry, I tried to provide a link to the Cavendish Pension Transfers page, but can't as I'm a new user.

reeves100

[FONT=&quot]Hi[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]As you admittedly don’t have that much knowledge of pensions taking advice would be the best route. Furthermore you would have the protection of having received advice whereas if you go it alone, the buck stops with you.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Reviewing your current pension is not so much a law but more of a duty of care and any IFA transferring a pension scheme without gathering the relevant facts would not be doing their job. There may be good reasons why not to transfer your existing scheme into a new one which need to be understood.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Regardless the set up fees seem a little excessive and you should be able to get it done for half that. The ongoing fee could be reasonable depending on what the service is they are offering; this can range![/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]How much are you looking to invest each month?[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]It would be best to use an IFA.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Regards[/FONT]

dunstonh

I went to see an IFA last week and they said they charge £420 to review the current pension plan (which they are apparently obliged by law to do before any transfer) and then it's a further 3% of my pension if I wish to transfer into the plan that they recommend for me (and then a further ongoing fee of 0.75% of the investment per year if I want their ongoing management of the fund).

They are not legally obliged to charge those fees but they are required to operate on fee basis as there is no commission any more. The charges of this adviser seem reasonable for the amount invested (3% is high but on £12k its low). Although I would decline the ongoing servicing as you just dont need it on £12k.

In reality, your pot is probably too small to be of interest to most IFAs and you are going to be stuck with a high figure relative to your pot size. You may want to consider going DIY on this one. However, do be aware that not all DIY contracts are cheaper.

leumas

Having said that, you will likely already have made decisions about the funds in which your pension is invested when you joined Fidelity. As a result, you may be able to continue to invest in the same funds if you stay with Fidelity... but possibly pay more charges.

Personally, I would go it alone (and have done so!). The providers want your money, so they will bend over backwards to help you. And they shouldn't charge for the privilege, as (once you've chosen your provider and product) they are only executing your request.

Thanks for the advice. The Fidelity pension was managed by my previous firm so I didnt choose the funds. I was told by Fidelity that I can't continue to pay into that fund anymore, they recommend I transfer the pension elsewhere.

Intrigued to hear that your experience in going it alone wasn't so tough, is there any guide available to talk people through the process? When I looked at the full list of funds in the fund supermarket the large selection looked daunting.

Regardless the set up fees seem a little excessive and you should be able to get it done for half that. The ongoing fee could be reasonable depending on what the service is they are offering; this can range!

How much are you looking to invest each month?

Don't suppose you know of any reasonably priced IFA's in London? Unfortunately unbiased.co.uk doesnt go into any detail of charges so you dont seem to find out unless you engage them. Also, is there a risk that the cheaper IFA's dont give as good advice or is any IFA advice generally considered as good as the rest? As for how much i am looking to invest, the pension calculator suggests £500 which I feel is too much, so likely £2-300.

In reality, your pot is probably too small to be of interest to most IFAs and you are going to be stuck with a high figure relative to your pot size. You may want to consider going DIY on this one. However, do be aware that not all DIY contracts are cheaper.

Thanks for the honest advice, can you recommend any good guide to doing this DIY if I wish to go down this route? Is it as simple as just going to Cavendish and just following the instructions?

redpete

leumas wrote: »

Thanks for the advice. The Fidelity pension was managed by my previous firm so I didnt choose the funds. I was told by Fidelity that I can't continue to pay into that fund anymore, they recommend I transfer the pension elsewhere.

Can you leave the money in there and then set up another scheme for new contributions? That way you would save transfer costs.

xylophone

http://www.cavendishonline.co.uk/pensions/

http://www.standardlife.co.uk/customer/pensions-and-retirement/looking-for-a-pension/products/stakeholder-pension.page

http://www.hl.co.uk/pensions/sipp?theSource=PCHLS&Override=0&adg=G+HLBS+HLS&gclid=CPj8sJrW-sECFYHHtAodOiMAew

might help.

Your_Hero

I would echo exactly what dunstonh has said. 3% is on the high side for advice, but not for a small sum like £12k. Plus you are looking to save a monthly sum as well so all in all you are quoted a fair fee for the work involved.

Ongoing advice is optional for your pot size, and most IFAs would not even offer it (it is not financially viable to at 0.75%). You might want to consider ongoing service once you have built up a sizeable amount (probably £40k-50k+).

pipkiksass

leumas wrote: »

I was told by Fidelity that I can't continue to pay into that fund anymore, they recommend I transfer the pension elsewhere.

More fool them, there will be others who want your business!

leumas wrote: »

Intrigued to hear that your experience in going it alone wasn't so tough, is there any guide available to talk people through the process? When I looked at the full list of funds in the fund supermarket the large selection looked daunting.

I'm not sure there's any guide, but once you set up a new pension and choose the funds, transferring an additional pension in is effectively a large contribution (n.b. this doesn't affect pension allowances, etc., as it's a transfer from a qualifying scheme to another qualifying scheme). All the provider will do is follow your chosen fund splits and reinvest your existing 12k pot accordingly.

Yes, the list of funds can be daunting, but there are plenty of managed funds which effectively take out the hard work. All large providers offer their own "managed" funds, which are basically a way of investing in a split of cash, bonds, gilts, and equities in various percentages. If you opt for a "defensive" managed fund, most will be in safer (but lower yield) funds, such as cash and gilts; if you opt for "aggressive" managed funds, these will have a larger share in equities. This might be the easier option if you decide to go down the DIY route?

leumas wrote: »

Don't suppose you know of any reasonably priced IFA's in London? Unfortunately unbiased.co.uk doesnt go into any detail of charges so you dont seem to find out unless you engage them.

I know plenty of IFAs in London, but unfortunately I don't know how much they charge! Their charging structure has to be transparent though, no harm in emailing them and asking before you even agree to an initial meeting?

leumas wrote: »

Also, is there a risk that the cheaper IFA's dont give as good advice or is any IFA advice generally considered as good as the rest?

Yes, there is a risk. Good IFAs will usually be Certified Financial Planners (CFP), it's not a guarantee of quality, but it's a start. Membership of professional bodies, such as the Professional Finance Society (PFS) and Institute of Financial Planning (IFP) are always reasonable indicators that people take their role seriously. Unfortunately pretty much anyone can call themselves an IFA (within reason).

leumas wrote: »

Thanks for the honest advice, can you recommend any good guide to doing this DIY if I wish to go down this route? Is it as simple as just going to Cavendish and just following the instructions?

It can be, yes. That's what I did. I now know a fair bit about pensions, but I didn't at the time!

edit: almost forgot, you could always give The Money Advice Service a call. They offer free, impartial advice. I'm sure they could help you make the decision about whether it's in your best interest to go with advice or to go DIY.

Your_Hero

Unfortunately pretty much anyone can call themselves an IFA (within reason).

Not true. There are only 2 types of FA's: either Independent or Restricted. The adviser must disclose which one they are. Their Terms of Business or Client Agreement document that they give to you (and go through with you) will tell you.

edit: almost forgot, you could always give The Money Advice Service a call. They offer free, impartial advice. I'm sure they could help you make the decision about whether it's in your best interest to go with advice or to go DIY.

MAS, despite their name, do not give advice. They will explain to you what your options are, which you may already know, but they will not advise you on what's best.

pipkiksass

Your_Hero wrote: »

Not true. There are only 2 types of FA's: either Independent or Restricted. The adviser must disclose which one they are. Their Terms of Business or Client Agreement document that they give to you (and go through with you) will tell you.

Anyone can become an authorised representative (AR) of an independent firm or network. Without being directly authorised by the FCA, this individual can then sell legitimately sell their services as an IFA. You're relying on the parent firm's due diligence in performing the appropriate checks on the ability of the individual. It's not as clean cut as you suggest, and entirely worthwhile checking the credentials of your IFA - even if their terms of business state that they offer independent advice, that doesn't mean that they are personally authorised to do so by the FCA.