Final Salary Pension Cash Transfer and IFA charges

craig1912

I have a deferred pension payable at age 60 (4 years time) and have been offered a transfer value of £850k. Having never used an IFA before I am speaking to three next week and wondered what sort of charges I should be paying for the advice and subsequent setting up of a SIPP(?) if appropriate.
1.25% -3% seems to be what they are quoting depending on the return that would need to be generated to match the £19000 annual pension. Around £10k seems a lot although I appreciate there is quite a bit of work involved and also indemnity insurance etc. to pay.
I do also want ongoing advice as thinking of retiring early and want help in choosing funds/drawdown etc. I would also have approx £145k form a MP scheme so also worried about lifetime allowance!
Any thoughts on what is reasonable re charges and pertinent questions I should be asking?
manybthanks

tacpot12

If you want the IFA to manage your investments for you 1.25% is a low fee. If you are going to manage the investments yourself it is way too much. There is very little work involved in setting up a SIPP and transferring your db pension to it. It takes about an hour to do.

The advice on whether to transfer is a different matter. There is quite a bit of work/analysis and fact finding. I paid £1000 last year for advice on two pensions. I'd expect it to cost about £750 for one pension.

wjr4

craig1912 wrote: »

I have a deferred pension payable at age 60 (4 years time) and have been offered a transfer value of £850k. Having never used an IFA before I am speaking to three next week and wondered what sort of charges I should be paying for the advice and subsequent setting up of a SIPP(?) if appropriate.
1.25% -3% seems to be what they are quoting depending on the return that would need to be generated to match the £19000 annual pension. Around £10k seems a lot although I appreciate there is quite a bit of work involved and also indemnity insurance etc. to pay.
I do also want ongoing advice as thinking of retiring early and want help in choosing funds/drawdown etc. I would also have approx £145k form a MP scheme so also worried about lifetime allowance!
Any thoughts on what is reasonable re charges and pertinent questions I should be asking?
manybthanks

We charge a flat fee based on the value of the pension & recently charged £5,000 for a £1.2m case. We then charge between 0.50%-1% pa ongoing depending on the investment strategy chosen.

As mentioned above, setting up a SIPP is easy but still takes a few hours, meetings, research, submitting the new business and then chasing of the new business by admin - please don't forget that you usually don't submit the SIPP and simply leave it in the hope that it will transfer in time!!

Lifetime allowance - you need to find out the value of both pensions as at 5th April 2016 and we would need to know whether you plan to continue contributing or not.

Linton

tacpot12 wrote: »

If you want the IFA to manage your investments for you 1.25% is a low fee. If you are going to manage the investments yourself it is way too much. There is very little work involved in setting up a SIPP and transferring your db pension to it. It takes about an hour to do.

.....

Simply creating the SIPP could well take an hour or less. What is far more work is deciding what you want to do with the money and therefore what are the appropriate investments to buy. Unless you are an experienced investor (perhaps even if you are) for £850K I strongly suggest you work with an IFA. Apart from buying and subsequently managing appropriate investments you would need to take care in extracting the money so as to minimise tax.

dunstonh

There is very little work involved in setting up a SIPP and transferring your db pension to it. It takes about an hour to do.

The transactions on most things dont take long. I did a case yesterday where the transaction took about 10 minutes to do. However, the preparation was 6 hours.

craig1912

Thanks for the responses so far.
I'm working out if I can retire from current job (fed up with corporate plc life), take a part time job and supplement from pension/ tax free cash. If I were to transfer FS amount and include DC amount I'd have £980k to play with- and there's no way I would NOT want to rely on professional guidance re investment strategy and drawdown. I do appreciate the work and expertise needed, just can't see why it should cost so much and why a lot of IFA's charge a percentage of the transfer value. Why should the size of the transfer make much difference to the amount of work involved to do it?

dunstonh

I do appreciate the work and expertise needed, just can't see why it should cost so much and why a lot of IFA's charge a percentage of the transfer value. Why should the size of the transfer make much difference to the amount of work involved to do it?

Then you dont appreciate the work and expertise needed.

1 - This is one of the highest risk transactions an adviser can carry out. Risks turn into costs.
2 - It carries higher costs under PI insurance.
3 - It carries higher regulatory requirements (you are almost certainly going to get near to 100% file checking by a third party) - increased cost.
4 - It requires higher qualifications. Specialists cost more.
5 - It can be relatively time consuming compared to easier transactions.
6 - The FOS uphold most complaints made on defined benefit transfers. So, no matter how good you think the file is and the reasons for doing it, the FOS will still usually uphold the complaint. The person complaining will usually turn into the opposite to what they portrayed themselves to the IFA. i.e. They tell the IFA they know what they are doing, understand the risks etc etc. However, on complaint they will tell the FOS that they didnt know what they were doing and the adviser didnt explain the risks and they were just doing what they were told to do.
7 - Nearly universally, the excess on defined benefit redress is higher than any other area.
8 - Liability is for the life of the company or, if self employed or partner, liability is for life. Some firms have had to close down because their liability had got so high that they couldnt afford to continue trading. it can bankrupt an adviser potentially. An adviser retired for 20 years can be liable for a complaint on a product sold 40 years earlier and have to pay out of their own funds.

As for percentage, again that comes down to costs. Putting right a £10,000 investment is cheaper than putting right a £100,000 investment or £1,000,000 investment. Also initial work is going to be greater as well. Small investments may use multi-asset funds but larger ones are more likely to have bespoke portfolios.

Some of the directories, such as trustpilot, take money from the adviser on income. Quite large amounts as it happens.

Most of the regulatory costs are percentage based. FOS, FCA, FSCS etc all charge the advisers on a percentage basis. Most of the compliance networks are percentage based (although directly authorised firms tend to be explicit).

Percentages are popular with consumers and advisers. However, most decent firms will have a cap and collar on their percentages and many will tier the percentage so it lowers as you invest more.

craig1912

I'm not going to disagree with anything you've said, as I said I do understand and to say I don't is wrong. I don't see even with all the reasons above how someone can justify £10000 to go through the transfer process and set up the SIPP.

soulsaver

People come on here looking for help to find an inexpensive solution for their objective.
However a lot of the responses seem to be in an effort to justify the high charges, instead of suggesting a process to find value for money.

So see here for more debate & see post #13: https://forums.moneysavingexpert.com/discussion/5554142

And here impartial advice and a response on which you can judge some:

https://forums.moneysavingexpert.com/discussion/5575055

HappyHarry

craig1912 wrote: »

I'm not going to disagree with anything you've said, as I said I do understand and to say I don't is wrong. I don't see even with all the reasons above how someone can justify £10000 to go through the transfer process and set up the SIPP.

I am a pension transfer specialist.

If someone came to me, looking for advice on a DB transfer for £850k, with another £145k in a SIPP, then I would be charging a fee in excess of £10,000.

This level of fee is not a blocker, it is simply a reflection of the specialist work required, and the risk taken in advising on such a transfer.

If you want a specialist to deal with this level of complex transaction, then you will need to pay specialist prices. As with all services, you pay for what you get. The suggestion from an earlier poster that you might be able to pay £750 to move this pension is frankly ludicrous. If you found an adviser to do it for that price, then you can be assured that either
i) You are being scammed or
ii) The adviser is not intending on being in business very long.

What questions do you need to ask?
i) Are you a pension transfer specialist with the appropriate qualification (and then check it)
ii) Are you FCA registered (and then check it)
iii) How often do you transact DB analysis on pensions of this size
iv) What are the risks involved for me, as a client.

You are talking about funds in excess of £1,000,000. You should look after these funds in the same way that you would £1,000,000 of any other asset you were dealing with. If this means a fee of £10,000+ to make sure that your £1,000,000 gets looked after properly, then you should not be afraid to pay it.

soulsaver

Yup - you who grew a million pound pot without the help of an IFA, but you need one who wishes to part you from a 5 figure+ sum for a few hours work for you to transfer it .... and another 5 figure sum per annum for ongoing 'advice' ...

There are sensible IFAs out there, who aren't going to scam you or rip you off... (or 'stupid' as one of the IFAs on here describes them as..) .. you need to find them.