Adviser fees - too high for our requirement?

huzzer84

Hi,

Mum has personal pension pot of ~£120k, set up a few years ago when we got an adviser to help with a pension transfer upon her divorce. The legacy from this is a 1% ongoing management fee to the adviser, plus servicing fees from the investments held, totalling around 1.4% pa.

Mum ~7-10 years to retirement. I am an accountant, with a reasonable understanding of pensions, investments, tax, etc. Given that we would be looking for a low-medium level of risk due to proximity to retirement, I am seriously considering moving the fund out of financial adviser management and into a diversified low-medium risk fund from one of the major players. This would cut the total charge to around 0.75%, saving ~£800 pa in fees, while not necessarily hurting investment performance given the low risk requirement.

Does this sound like a sensible proposition?

As background but not necessarily asking for views on: we're aware that this is a small pot, reasonably well aware of options at retirement under the recent changes (including the fact that mum may never fully retire of her own will), and are considering adding a lump sum to the existing £100pm contributions to make efficient use of some existing funds and try to improve the fund size at retirement.

jem16

mhurren wrote: »

This would cut the total charge to around 0.75%, saving ~£800 pa in fees, while not necessarily hurting investment performance given the low risk requirement.

Does this sound like a sensible proposition?

If you feel you don't need a servicing arrangement then it seems sensible not to have one. However with that pot size I would have thought you could get something more in the 0.4% range.

Linton

A £120K pension pot is much larger than average, sadly.

How does Mum intend to use her money in retirement? If she intends to buy an annuity starting to derisk now could make sense. However if she is looking at drawdown of some form then there is much less need as some of her money wont be used for perhaps 30 years. Under such circumstances significant derisking could be a poor decision.

Do you feel you have the background to have these discussions with her and manage the funds accordingly? Could it be a concern that if the investments went wrong for some reason relationships could be harmed? ISTM that actively managing money for friends and relations is something to be avoided. Would it be worthwhile keeping the IFA, or some other 3rd party, in the loop for advice whilst you do the leg-work?

princeofpounds

I agree that you could probably even do a touch cheaper, as already pointed out.


It sounds sensible enough, there will be some devil in the detail over what is actually in such a product.


I also agree that derisking the entire portfolio may not be necessary.


If your mother is 10 years from retirement, then saving on the financial adviser fees would in itself deliver approx. a 10% higher pension in the end, assuming the underlying investments perform the same.

macca1974

Why do you need to transfer the pension? Depending how the fee is set up with the IFA, couldn't your mother just inform them that you no longer wish to pay a fee for ongoing advice and that they should cease taking any additional management fees. Then you would be only paying 0.4% in total, which seems quite a good deal for platform and funds.

It might be that whatever platform you are on with the IFA can't do that, but I would have thought that it would be worth asking the question.

dunstonh

Why do you need to transfer the pension?

They may not need to but some providers require an intermediary. If you look at this pension, it sounds like a personal pension (not a SIPP or platform pension) based on the charges. i.e. 1% adviser, 0.4% provider and fund. So, the removal of adviser should be 1% but the OP is saying 0.65%. The provider could be priced low as it passes the admin on to the adviser. Or they may remain low and accept client instruction.

Another option is to change IFA to one that would be more typical priced at 0.5% p.a. Or ask the existing IFA to reconsider their pricing to that level.

xylophone

Can it be transferred to a SIPP?

http://www.thisismoney.co.uk/money/pensions/article-1712426/How-cheapest-low-cost-Sipp.html