Should I use an IFA?

alanbee

I retired early two weeks ago and intend to draw down from my works money saver pension pot when the new rules kick in, in April.

A little background - my pension pot was made up of my contributions, matched by my employer. The company gave us the services on an Independant Financial Adviser and my pot is with Royal London.

I know exactly what I want to take, namely my 25% tax free then in one years time start to draw down a regular monthly income. Job done...

Now I have found out that this IFA wants 3% of my drawdown amount as his fee to set it up, followed by another 0.5% should I require "further advice". He also quotes approx 1% per annum investment fee for the pot (which I fully understand).

My first question is - do I have to go with him and his fee (or anyone for that matter) or can I simply do the paperwork myself and set everything up with Royal London myself?

Next question - do I have to leave my pot with Royal London or can I shift it to another provider if I got a better rate and if the answer is yes, would Royal London charge me a transfer fee?

Thanks for any help on this.

DancingBadger

How much is your 'pot' worth?

Chickereeeee

alanbee wrote: »

The company gave us the services on an Independant Financial Adviser and my pot is with Royal London.

It does not seem like they 'gave' you anything, if you have to pay him. Are you sure your company does not cover the 1-off fee?

C

alanbee

The pot is worth £77k

dunstonh

Now I have found out that this IFA wants 3% of my drawdown amount as his fee to set it up, followed by another 0.5% should I require "further advice". He also quotes approx 1% per annum investment fee for the pot (which I fully understand).

When looking at that 3%, it needs to be put in context. it could be cheap or expensive. Hence the question about fund value which you say is 77k.

3% of 77k is £2310 which is not unreasonable for a drawdown case. Although the 3% may be on the 75% (after you take your 25%) which would make it £1732.

My first question is - do I have to go with him and his fee (or anyone for that matter) or can I simply do the paperwork myself and set everything up with Royal London myself?

An adviser is doing multiple things.

1 - Advice - this will allow them to filter out unsuitable options and provide advice on the suitable options. It will be based on methods, providers, investments etc
2 - Implementation - i.e. the admin
3 - Consumer protection and with an ongoing service you get that ongoing. This would likely include investment reviews, adjustments, cash balance adjustments (if using that method) etc.

If you DIY, you need to be doing those yourself. Its just like any other area in life. DIY or get someone to do it for you. If you DIY and make a pigs ear of it, it can be a costly mistake. If you DIY and do it well, you can save money.

Next question - do I have to leave my pot with Royal London or can I shift it to another provider if I got a better rate and if the answer is yes, would Royal London charge me a transfer fee?

This is what an adviser will look at as part of the advice process. If you DIY, then you need to work these things out yourself. Royal London have had dozens of different types and versions of pensions over the years. Without analysis, its impossible to say.

When you say better rate, that isn't how it works with investments. Also, when using drawdown, you should have a defined investment strategy and income withdrawal process. There are multiple ways that are considered suitable but you need to decide on which if you DIY.

alanbee

Many thanks for the advice. I think I will stick with the IFA as its too risky to go it alone. From his reply I think the fee is based on the pot after the lump sum making it nearer the £1700

Bootsox

alanbee wrote: »

Many thanks for the advice. I think I will stick with the IFA as its too risky to go it alone. From his reply I think the fee is based on the pot after the lump sum making it nearer the £1700

Sounds like a right rip-off, £1,700 for something you could easily do yourself.

bigfreddiel

dunstonh wrote: »

When looking at that 3%, it needs to be put in context. it could be cheap or expensive.
.

3% is 3% regardless of the size of a pot.

What you really mean is that the ifa should quote a percentage fee with a min and/ or max amount. Simples!

Cheers fj

Aegis

bigfreddiel wrote: »

3% is 3% regardless of the size of a pot.

What you really mean is that the ifa should quote a percentage fee with a min and/ or max amount. Simples!

Cheers fj

3% might be 3%, but 3% on a £10,000 investment is a bargain, while 3% on a £1 million investment is overpriced. This is why it's important to put the fee into pounds and pence when considering whether a fee is expensive or not.

Aegis

Bootsox wrote: »

Sounds like a right rip-off, £1,700 for something you could easily do yourself.

Exact same logic applies to builders, painters, car mechanics, lawyers, and many many more examples. Some people want to pay a professional to do things for them, others don't. If you want a professional, you pay fees for the services you obtain, and if it's considered to be good value by the client then it's almost certainly not a rip off.

dunstonh

Bootsox wrote: »

Sounds like a right rip-off, £1,700 for something you could easily do yourself.

Tell us your job and you will get people saying they can DIY that too.