Fleeced by Financial Advisor? Pensions

cryschuchimac

Thank you all for your replies. I'm having trouble using the quotes... cant get it to come up on the computer.

The fee has been confirmed by my employer as a 'set up' charge and yes it does apply to the first year only. If I want to maintain him for advice it is 0.5% annually, but this is merely a risk review and review of performance. He's not selecting/moving funds. So obviously I wont be taking that up and that has been declared as optional.

My employer has said that if I want to pay no set up fee then they will pay it and their contributions to me will be less. It would work out the same. They also said there's a fee to any financial product.. and you pay for what you get. Well, I appreciate there is a cost to getting the pension set up but I still question why 20% for a setup... I'm not receiving advice.

So I guess this is my employer misselling what their contributions actually are for the first year. I'm really miffed as to how this has been communicated.

I suppose the big question left then..... is 20% of first year contributions a ridiculous fee? Ok I can argue whether I or my employer should be paying....

My employer thinks he's getting a good deal - and I feel like he's not based on the feedback and conversations I've had. How can I demonstrate he/we aren't getting a good deal?

Thanks so much for all the responses

cryschuchimac

I now have a copy of what I signed (under duress and being told that this was to receive the 'massive discount'... stupid stupid stupid... this man was clever with us all with 'time pressure')

The document is an 'authority to proceed'. The 'initial/advice fee confirmation' section states:

Brief description of advice/service: Initial advice in setting up the auto enrolment scheme fund selection and ongoing services

Amount of payment for advice/implementation of advice/regular premium: Calculated at 20% of each premium invested for the first 12 months

cryschuchimac

Yes, so this is clearly an advice charge and not a 'set up' fee that my employer is saying it is. But he's only suggested the company use Aviva... and given us a fund list. Definitely nothing personal about the advice.

bostonerimus

cryschuchimac wrote: »

They also said there's a fee to any financial product.. and you pay for what you get.

He's obviously never heard of Jack Bogle who said, "In investing, you get what you don't pay for."

dunstonh

I'm not receiving advice.

An adviser can only collect an advice charge if advice is being given.

But he's only suggested the company use Aviva... and given us a fund list.

An adviser is required to recommend a provider and the investment funds. Giving you a list to pick from yourself is not advice. So, you are paying for something you are not getting.

Although historically, FAs, rather than IFAs, did document it that they showed the list of funds suitable for you and you picked the one you wanted. IFAs cant do that.

MoneyGeoff

It does seem as though your employer is passing on the set up fee. If they'd just paid the set up fee and then told employees that the employer contribution is 3% in the first year and 4% thereafter you probably would have been fine with that (even though it's slightly worse) but the way they are doing it is a bit fishy and annoying.

Alexland

Pension providers normally absorb their costs on setting up pensions as it's to their commercial advantage to gain a new customer who will pay fees against their contributions. Some like Aviva do not consider the pension to be active until the first contribution is made to avoid customers setting them up and never using them.

It worries me that the agreement you signed has "ongoing services" as this suggests the advisor will be taking the 0.5% and doing those regular reviews you don't want. If you have signed up for that can you serve notice without jepordising the employer contribution?

I would run with it for now and move to NEST (and transfer the existing pension) when employer contribution increases to 3%. There are a lot of advantages to having a NEST pension over the long term the fees will probably workout lower.

Alex

dunstonh

If you have signed up for that can you serve notice without jepordising the employer contribution?

The ongoing service is required to be able to be cancelled without any consequence. (the exception being where certain investment strategies are being used which the adviser has an input on).

I would run with it for now and move to NEST (and transfer the existing pension) when employer contribution increases to 3%.

If there is no ongoing servicing and the default option on this scheme is under 0.75% with no initial charges, why would you go to NEST?

NEST is a basic scheme and not generally desirable unless you have very small amounts.

Alexland

As per the rest of the sentence over the long term NEST may work out cheaper than 0.75% somewhere around 0.4% to 0.5% depending on how long the investment is run for as the initial charge pays back in cheaper fees. Lower TCO might encourage the OP to make additional contributions.

Alex

dunstonh

Alexland wrote: »

As per the rest of the sentence over the long term NEST may work out cheaper than 0.75% somewhere around 0.4% to 0.5% depending on how long the investment is run for as the initial charge pays back in cheaper fees. Lower TCO might encourage the OP to make additional contributions.

Alex

But you would also be giving up the employer contribution.