Pension and financial planning for >60

Aegis

aleemj wrote: »

I am working alongside F1001 to find a suitable way forward. I am not a finance professional but together we are trying to figure out what to do. F1001 was awesomely proactive in kicking off this thread for us (thanks!) and I have some additional points of clarification of the situation and would like to ask a couple more questions of the respondents in this thread if I may.

Firstly thank you all for your responses - clearly so much valuable knowledge and insight here and we would be remiss not to mine it for more.

Secondly a quick recap on the situation:
1. Implementing the pension sharing order requires the input of an adviser to allow the pension funds to be moved to a new home. This is why we started looking for an adviser in the first place.
2. No IFA we spoke to was willing to do that and that alone, without a financial planning conversation covering other areas. We saw this as a good idea too since there are many unknowns about the future and lots we don't know about how to plan for it.
3. As well as the pensions, there are other assets in play also, which are currently idling as cash so we need to do something with that too.

@bigadaj

The fee is 2.5% on the first 300k and 1.5% after that. The ongoing charges are zero fees for Lloyds management of the portfolio, and we have been quoted total fees of 1.1% - 1.4%.

This initial fee can definitely be beaten for larger cases, possibly by a significant margin.

@jem16

The IFAs we have been working with have been quoting us ongoing fees in the same range as the *total costs* for Lloyds, to which you would add product costs. IFAs we have spoken to have been very cagey about discussing product costs.

You're speaking to very expensive IFAs then. There are some out there who, since the Retail Distribution Review, have decide that they were suddenly worth twice as much as they were before, which ends up being 1%, but there are still many of us operating on the same basis as before.

If your investment amount is significant you should be able to get the ongoing adviser charge to under 0.5% with investments then sitting on top. Investments recommended by an IFA could cost as little as about 0.4% all-in or much higher depending on the level of service you want and how tailored you want the portfolio to be to your specific circumstances. Importantly, an independent adviser has access to this entire range and can pick a product best suited to you rather than just what the bank wants them to use for all clients.

Where can we find some objective detailed feedback on these products?

If you find out, let me know, it will make my research duties much easier!

Flippant comments aside, this is actually a very complex area to try to carry out detailed product reviews in, as the majority of reviews are by their nature going to be subjective. I personally haven't used Scottish Widows voluntarily in recent years because at times it has taken me over an hour on their telephone system to speak to someone about a policy which doesn't have all the information I need online - this may well be much more relevant to me than it is to you, therefore I would put more weight on this type of support than someone who doesn't need to get that type of information regularly.

@saver861

Zero ongoing management fee charged by Lloyds. Product fees are non-zero but have been quoted to us as around 1.1% - 1.4%.

The zero ongoing fee is something of a red herring, as Lloyds will pass all business to Scottish Widows as what's called a vertically integrated arrangement. You're right to look at just the total cost as a result, but it's important to know exactly what you will get for that. I think I saw earlier that this was clarified to be "unless we want to actually review it" which in reality makes it more correct to compare the cost with a one-off service from an IFA rather than an ongoing model. When you do that, you should be stripping out the advice costs and comparing only those associated with the investment, which in this case would seem to be 1.1% - 1.4% compared with the 0.4% or higher I mentioned earlier. This becomes difficult because within the latter range is a huge spread of possible charges, but clearly it is possible to get much cheaper via the IFA than you have been quoted.

atush

I agree, 2.5% on 300K is stonkingly expensive

atush

Why does the pension sharing need to move the pension?

Cant the pension remain where it is (but be split between both parties)?

dunstonh

2. No IFA we spoke to was willing to do that and that alone, without a financial planning conversation covering other areas. We saw this as a good idea too since there are many unknowns about the future and lots we don't know about how to plan for it.

The term IFA covers different business models. If you contact IFAs that focus on long term holistic financial planning then they will want to know everything. Many others would do this transaction as transactional (its an easy one most IFAs).

The fee is 2.5% on the first 300k and 1.5% after that. The ongoing charges are zero fees for Lloyds management of the portfolio, and we have been quoted total fees of 1.1% - 1.4%.

2.5% is very expensive on £300k. Damned expensive. I wonder if the IFAs you have seen are pricing you out as you dont fit their model. If you contact a firm that prefers to deal with £1 million + then their pricing will be competitive for £1m plus but expensive for those with less as they dont really want those with less and therefore charge more to either put the person off or at least make the same as if they were dealing with higher net worth individuals.

1.5% would almost certainly be the typical bottom line and not the adviser charge (0.5% is the typical ongoing adviser amount). Lloyds are transactional and dont provide ongoing servicing and therefore dont charge for it. It is purely a one off piece of advice for them. You are mistaking what they do beyond the initial sale. Which will be nothing in the case of Lloyds.

At the moment, you are comparing an IFA with an ongoing service vs Lloyds with their transactional service. If you want ongoing servicing then you dont use the bank. If you want transactional then use a better value IFA than you have been quoted so far.

IFAs we have spoken to have been very cagey about discussing product costs.

Until you research the market and personalise the recommendation it is impossible to say what the product charges will be. You can give a ballpark guide figure and an IFA will know they can do better than SW. But you cant be any more specific at this stage.

Your product and fund cost could be just under 0.4% if you wanted to focus on cost as a priority. It could be as high as 2.5% at the other extreme. 1.5% would not an unusual figure quoted as an all in (adviser/product/investment).

Where can we find some objective detailed feedback on these products?

That is what the IFA does. The I stands for independent. The IFA is required to carry out research and due diligence on the products.

How much of a difference are we talking about? Could we be looking at a 5-10% return compared to others which could offer 10-15% for a similar portfolio?

Returns are always unknown in advance. Lloyds has been expected to sell Scottish Widows for some time and the combining of SW and CM was seen as an early move to allow that. Insurers are handicapped by bank ownership and bank funds historically have been bad. When SW does get sold, it may improve. Or it may get sold to Phoenix or Reassure and join the hundreds of dead insurance company books in run down that those two companies hold. Returns are not typically a priority to a company in run down.

So, you could be looking at worse. They may surprise us and change the trend of the last decade and improve out of the blue. Although no bank owned insurer has ever done that.

Not upfront fee products - upfront charge from Lloyds (for the financial planning and advice) then from then on only product costs, zero management charges.

What is the advice fee from Lloyds?

jem16

aleemj wrote: »

The fee is 2.5% on the first 300k and 1.5% after that.

Just to clarify - this is the fee you have been quoted for Lloyd's initial fee?

What initial advice fee have you been quoted from the IFAs as you have only mentioned ongoing fees so far.

F1001

Hi All,
I hope I am not confusing this by stating what I understand of the Lloyds fees .... please correct if I am wrong for Lloyds and/or IFAs....


Initial advice:
Lloyds charges £2000 fee for initial advice and report - this report includes pensions advice, and everything else to give cash flow planning, giving a holistic financial plan going forward. This includes advice on transferring the pensions (the pensions need to be transferred externally out of the existing scheme due to divorce pension share order) - Lloyds will compare whether it is more cost effective to move to Scottish Widows than to set up a new scheme with the current provider(s), either way, an IFA has to be consulted to show to the current provider that the client has received advice on where to transfer the new pension asset to. So we definitely need this kind of initial advice that includes advice on the pensions at least, and also as she is starting a new, a good financial plan / strategy is also helpful.


vs IFAs - anywhere between £500 - 2000


Implementing advice:
If we take the recommendation by Lloyds and request them to implement the advice, they cancel the £2000 charge and instead charge 2.5% of AUM - the assets that are moving to Lloyds. So if they suggest moving £100k pension plus £100k of savings to a SW pension and investment portfolio then we would not pay £2000, we would pay £2,500. For over £300k AUM, you are charged 2.5% up to 300k and 1.5% above. Pensions will be moved (probably to SW), (Lloyds) products set up etc.


vs IFAs - in addition to the one-off initial advice charge, we have been quoted various implementation fees between 1-3%


Ongoing charges
No ongoing management charges. Any further general or transactional advice e.g. change of risk appetite, change of income needs and lifestyle, additional funds added to portfolio will go through the same cycle as above (or separate charges will apply). Portfolio is re-balanced "regularly" to ensure asset mix is maintained as recommended in initial report. We probably can ask for general advice from the private banker.


vs IFAs - some have said they will charge hourly- looking at around 1.5%, some said around 1%, some saying same amount as initial advice fee. This includes re-balancing. Not sure about level of ongoing advice?

dunstonh

Initial advice:
Lloyds charges £2000 fee for initial advice and report - this report includes pensions advice, and everything else to give cash flow planning, giving a holistic financial plan going forward. This includes advice on transferring the pensions (the pensions need to be transferred externally out of the existing scheme due to divorce pension share order) - Lloyds will compare whether it is more cost effective to move to Scottish Widows than to set up a new scheme with the current provider(s), either way, an IFA has to be consulted to show to the current provider that the client has received advice on where to transfer the new pension asset to. So we definitely need this kind of initial advice that includes advice on the pensions at least, and also as she is starting a new, a good financial plan / strategy is also helpful.


vs IFAs - anywhere between £500 - 2000

The initial advice is for initial service. Not for ongoing. Forget a bit of sales spin telling you they will be there in the future should you need them and can speak to them as and when etc. Initial is initial. Ongoing is ongoing.

Implementing advice:
If we take the recommendation by Lloyds and request them to implement the advice, they cancel the £2000 charge and instead charge 2.5% of AUM - the assets that are moving to Lloyds. So if they suggest moving £100k pension plus £100k of savings to a SW pension and investment portfolio then we would not pay £2000, we would pay £2,500. For over £300k AUM, you are charged 2.5% up to 300k and 1.5% above. Pensions will be moved (probably to SW), (Lloyds) products set up etc.


vs IFAs - in addition to the one-off initial advice charge, we have been quoted various implementation fees between 1-3%

Price keeps going up. Most IFAs I know do not have implementation charges. I know some do but its not a common pricing model. This is in part because if you separate the charges out like this then you introduce VAT. Whereas if you bundle the price (such as £1500 fixed fee for the process) then no VAT is chargeable.

With Lloyds there is no "probably" about it. They are tied sales agents of Scottish Widows.

Ongoing charges
No ongoing management charges. Any further general or transactional advice e.g. change of risk appetite, change of income needs and lifestyle, additional funds added to portfolio will go through the same cycle as above (or separate charges will apply). Portfolio is re-balanced "regularly" to ensure asset mix is maintained as recommended in initial report. We probably can ask for general advice from the private banker.


vs IFAs - some have said they will charge hourly- looking at around 1.5%, some said around 1%, some saying same amount as initial advice fee. This includes re-balancing. Not sure about level of ongoing advice?

You are not paying ongoing servicing fees with Lloyds as you are not getting ongoing servicing. You pay transactional charges for each future advice event.

You have introduced a phrase "private banker". Can you confirm whether this is Lloyds bank branch advice or Lloyds Private Banking advice? (the latter is more of a discretionary investment service which means their charge is added to the product and investment fund and you can also suffer broker charges. They tend to have a bias towards Lloyds group products but are not actually tied - however, I have seen LPB portfolios that are nearly all Scot Wid funds)

vs IFAs - some have said they will charge hourly- looking at around 1.5%, some said around 1%, some saying same amount as initial advice fee. This includes re-balancing. Not sure about level of ongoing advice?

The ongoing charge level that dominates the industry is 0.50% pa. 1% can apply to smaller amounts. Ongoing advice requires ongoing services to be determined and documented. Scottish Widows agents will typically use a multi-asset fund. An IFA will typically build an investment portfolio.

There is absolutely no reason for you pay for tied sales rep advice. The same product and same investment funds are available to IFAs at the same cost. However, the IFA will have access to more. The IFA is better than a SW sales rep in every area except personality and adviser cost (both of those two are variable to the individual. You may not got on with one IFA or the IFA may be expensive. Although you may not get on with the SW rep (or the later one or the one after that or the one after that as they change so quickly) and their charge is certainly higher than I would expect from most IFAs.

Shop around a few more IFAs to get more quotes. Don't focus on the product charges at this time. Just the adviser charges.

F1001

Hi - thanks! Sorry I got this very wrong re the ongoing charges for Lloyds - the non pension assets will be in a Discretionary Managed Portfolio costing around 1.5% total annual costs which breaks down to 1%+VAT service charge, and 0.5% fund charges.


And yes I kept thinking Lloyds was an IFA but without the I... he / she would be a senior private banker and would charge fees. We would not be part of the Private Banking though because those charges are higher as you get advice as and when you want.

dunstonh

Hi - thanks! Sorry I got this very wrong re the ongoing charges for Lloyds - the non pension assets will be in a Discretionary Managed Portfolio costing around 1.5% total annual costs which breaks down to 1%+VAT service charge, and 0.5% fund charges.

So, the advice charge from Lloyds should have VAT on top of it whereas the IFA will not. HMRC guidelines mean that advice to use a DFM is a vatable transaction.

he / she would be a senior private banker

Bank clerks like their titles. Senior stationary clerk is a genuine title used by one back in my banking days.

You really have enough to go on now I think. If you are still considering Lloyds then I doubt anyone can change your mind. I dont think you should use those IFAs either. You can get much better value with a bit more shopping around.

F1001

Thank you!! Thanks all - I am so grateful - this is a minefield for anyone who isn't used to managing finances - the exact people that need IFAs! And I am seriously re-thinking the Lloyds option now. I was maybe weaning towards a household brand name to make me feel like her finances are in safe hands but I should know by now that isn't anything to go by!
If anyone has a good recommendation of an IFA that has a decent track record of making good returns, reliable, honest and clear on charges and reasonable fees please message me!
Thanks all - merry Christmas!