New Job and pension puzzle

cr1mson

Started new job and they arranged for me to meet someone about joining their pension scheme. This turns out to be an IFA and I am going to be charged for his "advice". Pension is effectively just a private pension and imho one with a high fee.

The company has picked the pension provider so it is only the fund that needs picked. He has picked one but offered no real explanations as to why this is suitable. He certainly hadn't done a full fact find.

There will be an initial charge as well as a monthly one.

I have never encountered this before and I am extremely uneasy about it especially as job is only part time so employer contributions will effectively be wiped out for first year. I have said won't be adding my own contrbutions but could I ask my employer to put contributions into my existing stakeholder pension.

Any thoughts?

HappyHarry

This turns out to be an IFA and I am going to be charged for his "advice". Pension is effectively just a private pension and imho one with a high fee.

It sounds like your employer has a company pension plan which is still paying commission to the adviser. The adviser will have agreed a commission arrangement with your employer when the pension plan was set up. This commission is often paid by way of a deduction from the contributions to your pension plan for the first twelve months.

employer contributions will effectively be wiped out for first year

It would be unusual for the adviser to take 100% of the first 12 months contributions.

I have said won't be adding my own contrbutions but could I ask my employer to put contributions into my existing stakeholder pension.

You could certainly ask your employer if they will consider paying to your existing stakeholder pension instead.

At some point in then future, before mid 2017, your employer will need to go through auto-enrolment. This means that all employees (bar certain exceptions) will need to be automatically enrolled in a pension scheme, to which both employer and employee will contribute. When this happens (known as your employer's staging date), any initial and ongoing adviser commission must stop.

cr1mson

Thanks I only work part time and contract only for 9 months although may be extended. According to documents there is an initial set up fee and an ongoing monthly charge from IFA and then the pension funds own management fees on top of this. Exagerated (sp?) when said eats up first years contributions but takes nearly 60%.

I have no problem paying for advice when necessary but I don't feel I am getting any value for money here.

dunstonh

Started new job and they arranged for me to meet someone about joining their pension scheme. This turns out to be an IFA and I am going to be charged for his "advice". Pension is effectively just a private pension and imho one with a high fee.

Auto enrolment schemes cant charge above 0.75%. That is unless you go away from default funds.

he company has picked the pension provider so it is only the fund that needs picked. He has picked one but offered no real explanations as to why this is suitable. He certainly hadn't done a full fact find.

Unless you are paying for the full advice service, you won't get a full advice service.

There will be an initial charge as well as a monthly one.

I have never encountered this before

All money purchase have annual fees. The fee can be collected on a 1/365th or 1/12th or whatver.

I have said won't be adding my own contrbutions but could I ask my employer to put contributions into my existing stakeholder pension.

You can ask the employer but unless they only employ one or two people then its unlikely they will do it. Plus, it would make you an opt out and the employer wouldnt have to pay any contribution into your pension then if they didnt want to.

Group personal pension schemes have been around donkeys years.

I have no problem paying for advice when necessary but I don't feel I am getting any value for money here.

How much are you paying for the advice?

cr1mson

The fees are £300 upfront and 0.5% monthly for IFA. It is the monthly fee from IFA I haven't encountered before. However last contact with IFA was before new rules came in.

Pension scheme fees are 0.85% which IMHO is high.

Staging date is May 2017 so auto enrolment not an issue.

Thanks.

dunstonh

The fees are £300 upfront and 0.5% monthly for IFA. It is the monthly fee from IFA I haven't encountered before. However last contact with IFA was before new rules came in.

This sounds like an old scheme which hasnt yet moved to the new rules. The fact the staging date is later is the reason why.

Pension scheme fees are 0.85% which IMHO is high.

Actually, the charge is 0.35% for the pension if the IFA charge is 0.5%. That makes the pension charge good.

0.50% p.a. is the most common ongoing remuneration level paid to IFAs for ongoing servicing. There are some changes happening on this front for group schemes which will reduce that on group schemes. Such as currently, the employer is getting the employees to pay the pension administration costs. The employer will have to pay those in future or do the work in-house themselves but not pass costs on to the employee.

However, as it stands £300 initial and 0.85% p.a. is not high. Whilst there is cheaper, there are plenty still stuck at 1% or more with no IFA involved.

cr1mson

It reads as if separate charges though ie pension company charge 0.85% IFA 0.5% but may just be poorly read.

Still think £300 a lot given pension provider already chosen and funds limited by employer. So really just a csse of printing out forms and getting them signed.Would guess half an hours work tops so based on rate of £175 an hour would think something in region of £100 more appropriate.

Thanks for all your help.

dunstonh

It reads as if separate charges though ie pension company charge 0.85% IFA 0.5% but may just be poorly read.

The old commission schemes show the total pension charge and the commission is paid out of that. With fee based schemes, it would show the pension charge, the adviser charge and a display the reduction in yield as a bottom line.

Still think £300 a lot given pension provider already chosen and funds limited by employer

The pension provider does not choose the funds.

Would guess half an hours work tops so based on rate of £175 an hour would think something in region of £100 more appropriate.

No. Most of the advisers I know are trying to get rid of group schemes as they are not profitable any more. This is why professional administrators are taking over many as they can streamline and not suffer many of the issues that IFAs have to cover off.

cr1mson

Thanks going to speak to work and see what can do.

The charges definitely aren't displayed like that!

Appreciate pension provider hasn't chosen funds but employer has chosen them and pension provider. As far as I can see IFA picks fund from list, sends me forms to fill in that is it. Surely not £300 work and an ongoing fee.

As I have no choice over pension provider and limited fund choice don't really feel counts as advice more administration.

Thanks for all your help!