IFA changed our pension scheme and raked in a fresh load of commission

moonbeaver

Hi

I joined our company pension scheme about six years ago. About three years in, the IFA started nagging the (then) Chief Executive to transfer the scheme to another provider. Smelling a rat, he refused for a long time, but eventually the transfer did take place.

For me and others in the scheme, we had one simple question for the IFA, 'Will it cost us anything?' His answer was of course, 'no, it won't cost you a thing'. So no-one made any fuss about the change to the new provider.

When we received our first statement for the new pension, we realised 25% of first year payments into the 'new' pension had been taken as commission by the IFA. Now, of course, we're very annoyed.

Does this sound like churning? Is it worth pursuing a complaint against this guy?

Thanks

dunstonh

When we received our first statement for the new pension, we realised 25% of first year payments into the 'new' pension had been taken as commission by the IFA. Now, of course, we're very annoyed.

And how much were the charges before? If the same then no difference.

Plus, quite a few modern pensions have a first year (or two) initial charge but then revert to factory gate pricing thereafter making them far cheaper in the long run compared to say a mono charged contract like a stakeholder.

Is the initial charge a commission or a fee?

Does this sound like churning?

Depends on how the charges compare. If the new scheme is beneficial then no it isnt. If the new scheme is worse, then yes it is.

Is it worth pursuing a complaint against this guy?

No. Why go straight to complaint when you dont know the facts? You dont know if the new scheme is better or worse. Why not ask the IFA how the scheme stacks up against the old one and what the benefits are over the old scheme. Indeed, the company would have received a written report giving them the pros and cons of the new scheme over the old one as part of the transaction to switch. You dont own the pension, the company does, so you cannot complain anyway. Only the employer can put a complaint in.

I do hundreds of pension transfers a year and the little you have typed could be applied to every single one of mine. Transferring a scheme is not churning when it is justified. You have given no evidence to say whether it is justified or not. Earning a commission or a fee is not evidence of that as the IFA would have been earning from it before anyway. He could be earning more, he could be earning less. What he earns out of it doesnt matter one bit. What you pay in charges is what matters.

moonbeaver

Thanks - but I'd really appreciate replies from people who are *not* IFAs and thus can give independent, non-biased advice.

dunstonh

moonbeaver wrote: »

Thanks - but I'd really appreciate replies from people who are *not* IFAs and thus can give independent, non-biased advice.

Well that's daft and to be honest I take offence at it.

No-one else can answer your questions any different than me. I have no interest in your pensions and have no reason to answer with any bias. Indeed, I often point out issues where I think the advice is bad.

Unless you get the facts and compare the plans no-one here is going to be able to offer you any other opinion. No-one can offer any advice either as that is against board rules. Even those of us that are regulated to do so. You havent answered any of the questions I have asked you either so anything said is total guesswork.

What if the old scheme had a 5% bid/offer spread? What if the old scheme had a 1.5% annual managment charge but the new scheme has a 0.4% annual managment charge after the 3rd anniversary?

It could be a mis-sale. It could be a small saving. It could be a massive saving. Without facts, who knows.

chesky369

Moonbeaver - Dunstonh has given you advice, it's up to you whether or not you take it or leave it. However, don't come on here and be stroppy in only your second post. Your original question was still standing and it's up to others if they want to reply - if I were them I probably wouldn't bother, since if you didn't like their answer, you'd probably be just as rude to them.

chesky369

Sorry - didn't mean advice of course, the word should have been opinion.

EdInvestor

moonbeaver wrote: »

Hi

For me and others in the scheme, we had one simple question for the IFA, 'Will it cost us anything?' His answer was of course, 'no, it won't cost you a thing'. So no-one made any fuss about the change to the new provider.

When we received our first statement for the new pension, we realised 25% of first year payments into the 'new' pension had been taken as commission by the IFA. Now, of course, we're very annoyed. Does this sound like churning? Is it worth pursuing a complaint against this guy?

You need to find out a bit more.For instance, the charges of the old scheme vs the charges of the new scheme.Plus the fund choices available.
Fees to the IFA are only a part of the total charges you pay, so his claim it wouldn't cost you any more may still be correct.

Presumably the company has a document from the IFA justifying the change to the new scheme.Ask to see it. It should contain an analysis of the pros and cons of moving to the new arrangments After you've read that, you will be a lot better equipped to approach your company to take action if it doesn't set your mind at rest.

moonbeaver

EdInvestor wrote: »

You need to find out a bit more.For instance, the charges of the old scheme vs the charges of the new scheme.Plus the fund choices available.
Fees to the IFA are only a part of the total charges you pay, so his claim it wouldn't cost you any more may still be correct.

Thanks EdInvestor - but seeing as the same IFA set up the original scheme, if he later decided it was no good, surely he's guilty of misselling?

To me, his motivation for moving the scheme is crystal clear - the extra £1400 commission he was able to swipe off me and other long-serving members of staff, paid to him as a lump sum, as soon as our dopey company representative signed authorisation to switch the scheme.

He also now gets '25% of each increase in the yearly rate of contribution arising when your salary increases.'

I think the suggestion that any benefit for us in reduced charges in the second scheme he set up might outweigh the £1800 he surreptitiously extracted is highly unlikely.

Oh and 'dunstonh', I love your line 'you cannot complain anyway' - we'll see about that!

jem16

moonbeaver wrote: »

Thanks EdInvestor - but seeing as the same IFA set up the original scheme, if he later decided it was no good, surely he's guilty of misselling?

Not necessarily. Pensions have changed a lot over the years. What was good then will not necessarily be good now.

The investment opportunites of modern pensions are much better than pensions of old and could see your return improve greatly. Would you rather the IFA just said "stick with it"?

You need to find out more facts before jumping to conclusions.

EdInvestor

moonbeaver wrote: »

I joined our company pension scheme about six years ago.

It's very possible that there is a big difference in the two schemes over this time frame.Since the Government's stakeholder push about 7 years ago, charges have come down dramatically,in many cases by half, and since the advent of SIPPs about three years ago, fund choice has improved enormously, with a selection of external funds now usually offered, never before seen.

It's quite possible that his recommendations are spot on.

Note that if there is a gap of 1% between the charges, this will save you as much as 25-30% of the value of your fund over the life of the pension.Beside that, an IFA payment like you mention in the early years would be comparatively small.

But you need to check the details.Nobody can make a judgment either way on what you've said so far.

Andy_L

omfg - Ed & Dunstonh agreeing :-)