Do you think pension tranfers need to be quicker, smoother and cheaper?

dunstonh

jamesd wrote: »

There are penalties for transferring modern pensions even if not called that:

1. Say £25 per investment to transfer in specie from some providers even though this is not correlated with the amount of time required to do the work.
2. Some fixed transfer fees.
3. Time out of the market.

One day switching between all major providers at the same cost as phone companies, nil, would be a good thing.

My response was on more mainstream options. You, quite rightly, mention some of the more advanced options - especially in the DIY market. These do tend to have small admin charges but that is often what makes their headline annual charge lower (the fact they charge for various tasks outside the normal day to day stuff).

The OPTIONS transfer system is capable of it. That is why you can see some pension transfers start on a Monday and be with the new provider and set up on the Wednesday. However, you need both providers to use OPTIONS and you also have the service queue (how long it takes for the work to get in front of someone).

jamesd

Yes, there's a lot of variation.

On the other end of things there's something like my SL work pension that after I asked now provides to free transfers out and subsequent ones at £50 a time with £5k having to remain in the pension. But in specie transfers not possible for that one in general because it's SL versions of funds.

While there is variation, the regulatory side naturally has to pay most attention to the less good cases, not the good ones that already do things well. And perhaps also to consumers not using advised products since advisers are more likely to decline to accept or recommend when there are poor terms.

redux

kidmugsy wrote: »

"Do you think pension tranfers need to be quicker, smoother and cheaper?"

At whose expense?

It was just so similarly phrased that I'm struggling to see it as a complete coincidence:

- there is an almost identically phrased MSE-started discussion about changing mobile phone network.

bigadaj

redux wrote: »

It was just so similarly phrased that I'm struggling to see it as a complete coincidence:

- there is an almost identically phrased MSE-started discussion about changing mobile phone network.

Slightly different level of consequences to most individuals though.

davemcc

I've been very lucky and have a large pension pot due to being required to join various pension schemes during my career.
As advised by MSE, HM Government and others I decided to visit a couple of big names to see what they would charge for the privilege of looking after my money.
I based my calculation on a hypothetical return but all percentages relating to charges and the initial set-up fee were quoted by the two 'pension providers'.
The results, in the form of an excel spreadsheet were sent to the 'financial consultants' for their comments. Each agreed that the calculations were correct.
Without going into the detail, the results were as follows:

Company A (the bigger of the two) wanted an initial fee of £6,000 to set up the pension and then a staggering 51% of the earnings (over 10 years) to 'manage' the fund.

Company B wanted an initial fee of £3,750 to set up the pension and then a staggering 21% of the earnings (over 10 years) to 'manage' the fund.

Given that these people need to make a living and that "setting up" these schemes is simply adding money into an already huge fund takes seconds AND given that there is no liability on these people if your money disappears due to "market fluctuations" this is nothing short of being a legitimate scam.

It is hardly surprising that the owners / managers of these funds are so wealthy and paid such huge sums (where have we heard that before?).

There is no doubt that once again, we are facing another major rip-off from the financial industry and one which, I'm sure, the majority of people embarking upon the pension trail have no idea is being perpetrated on them.

Pensioners beware!!

davemcc

dunstonh wrote: »

It should be noted that there are no transfer penalties on modern pensions.

However, lets say your provider gave you 120% allocation on your pension contribution but has a annually reducing penalty if you transfer out to allow them to get back that extra allocation. What you are suggesting would be unfair as people could have got that 20% allocation waited three years and then transfer out at no cost with an extra 17% paid in by the pension company.

Not sure about this, one of my pension providers told me that my 'pot' was £215,000 but due to "market conditions" if I wanted to transfer out to another scheme I would LOOSE £46,000.

Is that a transfer penalty or not?

dunstonh

davemcc wrote: »

Not sure about this, one of my pension providers told me that my 'pot' was £215,000 but due to "market conditions" if I wanted to transfer out to another scheme I would LOOSE £46,000.

Is that a transfer penalty or not?

That would be a market value reduction. That is on the investment fund. Not the pension. Also, there are only a handful of pensions that offer a with profits fund nowadays.

Having £215k in a with profits fund pension is investing of yesteryear. That said, if its with one of the big two WP providers and you are close to retirement, then it could be a good thing. A number of WP investments can carry guarantees too.

Remember I said modern. That is post 2001 and applied to pensions not the investments within the pension.

Company A (the bigger of the two) wanted an initial fee of £6,000 to set up the pension and then a staggering 51% of the earnings (over 10 years) to 'manage' the fund.

That is not a conventional charging method and I would actually class that as a scam. Although I suspect you have misunderstood and are not correctly relaying the charges.

Company B wanted an initial fee of £3,750 to set up the pension and then a staggering 21% of the earnings (over 10 years) to 'manage' the fund.

Same again. Which leads to me thinking you are misinterpreting the charges. It is rare to find any company charging by that method as it is considered inappropriate. Yet you find two. Something is wrong.

Given that these people need to make a living and that "setting up" these schemes is simply adding money into an already huge fund takes seconds AND given that there is no liability on these people if your money disappears due to "market fluctuations" this is nothing short of being a legitimate scam.

There is a heck of a lot of liability and the regulatory costs are getting silly.

There is no doubt that once again, we are facing another major rip-off from the financial industry and one which, I'm sure, the majority of people embarking upon the pension trail have no idea is being perpetrated on them.

There is no doubt that you are misreading charges and jumping to assumptions based on that.

fairb

I have a modest amount of money (around £2,800) in the Prudential Teacher AVC scheme. As I left the profession a number of years ago, I contacted the Pru re moving the money to my existing provider, Royal London. Pru were efficient and sent me the necessary documentation promptly. However, Royal London took over a month to inform that they could not accept the transfer without me seeking independent financial advice.

The sum I was hoping to move corresponds to 1% of my pension pot and equates to about 2 monthly payments at my current contribution level. I was quoted £750 to provide the necessary financial advice (give formal recommendations and deal with the paperwork). Needless to say, I did not proceed with the transfer.

dunstonh

However, Royal London took over a month to inform that they could not accept the transfer without me seeking independent financial advice.

That is because they retail via intermediaries. Not direct to consumer. If you want to DIY then use a DIY provider.

sandsy

dunstonh wrote: »

That is not a conventional charging method and I would actually class that as a scam. Although I suspect you have misunderstood and are not correctly relaying the charges.

I suspect not. I would hazard a guess that the charges won't be quoted in that way, they are being quoted conventionally. However, I suspect the OP has derived the charges from a KFI and compared them to the projected gain.


I can easily come up with similar numbers using a similar approach.


It's just a different way of expressing the charges rather than as a % of fund or an RIY. It's effectively a value-add methodology - saying how much of your potential gain you'd be giving away.