Financial Advisors cagey

mum_of_joey

I very recently discovered a pension that I never knew I had. From all the articles that I read, it seemed that I was obliged to use a Financial Advisor to deal with my pension, so I contacted a couple of local ones. However, neither of these Advisors mentioned that it wasn't mandatory to have advice from a Financial Advisor if my pot was less than 30,000 pounds before transferring my pension pot to an annuity or drawdown scheme (I will also take out my 25% tax-free cash) - they were going to ask for 1300-1400 pounds for doing it.

My pension pot, as given in a letter dated December 2017 (which I didn't see until the end of April this year), was for 29,114 pounds and, in fact, the pension firm has updated the figures now, and the total is now 28,500 pounds (sorry - my pound sign has disappeared off my keyboard).

The only reason I found that there WAS this 30,000 pound limit was because of an answer on this forum recently to someone else's question, for which I am most grateful. I know that it may be advisable to use an 'expert' but the pension seems pretty 'simple' and I am also seeing the (free) PensionWise people in a few weeks and have read up on 'options'. I had read up a lot of stuff and didn't see anywhere which mentioned this limit (until I knew of it, and then started asking Google for info. on it but only found the odd bit about it).

Are FAs obliged to mention that they are not actually obligatory for pots under 30,000, because neither of them did? And is the top limit exactly 30,000 pounds (ie if it was 30,001 pounds, I would be obliged to use a Financial Advisor?)

Many thanks.

dunstonh

However, neither of these Advisors mentioned that it wasn't mandatory to have advice from a Financial Advisor if my pot was less than 30,000 pounds before transferring my pension pot to an annuity or drawdown scheme (I will also take out my 25% tax-free cash) - they were going to ask for 1300-1400 pounds for doing it.

So, you contacted a financial adviser to ask for advice and that is what they said they would do. Why would they even consider whether you legally needed it or not if you contacted them?

Are FAs obliged to mention that they are not actually obligatory for pots under 30,000, because neither of them did?

No. Cant see any reason why they would either. That limit has very little to do with advisers.

I have transferred many pensions under £30k and cant see why you consider it an issue.

And is the top limit exactly 30,000 pounds (ie if it was 30,001 pounds, I would be obliged to use a Financial Advisor?)

29,999.99p or under.

xylophone

The compulsory advice on transfers of benefits valued at over £30,000 relates to certain types of pension transfer.

This information is readily available on the internet.

https://www.pensionwise.gov.uk/en/financial-advice

For those with benefits valued at £30,000 or less advice is not compulsory but might prevent future difficulties with MPAA for example.

https://forums.moneysavingexpert.com/discussion/comment/74375774#Comment_74375774

sandsy

No wonder advisors aren't trusted by a large proportion of the population. Just as a matter of decency, I'd expect them to tell you. It could be argued that they're not acting in your best interests if they don't and are allowing themselves to be swayed by the fees they could charge you which could be a conflict of interest.

You need advice if the amount is over £30,000 (from http://www.legislation.gov.uk/uksi/2015/742/pdfs/uksi_20150742_en.pdf):

"The trustees or managers are not required to carry out the check in section 48(1) of the Act if the total value of the member!!!8217;s or survivor!!!8217;s subsisting rights in respect of safeguarded benefits under the pension scheme is £30,000 or less on the valuation date."

Marcon

sandsy wrote: »

No wonder advisors aren't trusted by a large proportion of the population. Just as a matter of decency, I'd expect them to tell you. It could be argued that they're not acting in your best interests if they don't and are allowing themselves to be swayed by the fees they could charge you which could be a conflict of interest.

See dunstonh's reply above.

dunstonh

No wonder advisors aren't trusted by a large proportion of the population. Just as a matter of decency, I'd expect them to tell you. It could be argued that they're not acting in your best interests if they don't and are allowing themselves to be swayed by the fees they could charge you which could be a conflict of interest.

I totally disagree.

If you get a phone call asking you how much it costs to transfer a pension then you give the info. You answer questions as asked and go with the flow of the conversation.

Advisers give advice. If someone has phoned you saying they need advice on transferring a pension then that need for advice hasnt changed whether its £25k or £35k.

And as IFAs can arrange plans cheaper than many DIY plans, who is to say that DIY will be cheaper.

Now, if in the flow of the conversation, it had become clear that the OP was stating a misconception then you would expect clarification. But if the subject never came up, why would it be mentioned?

zagfles

sandsy wrote: »

No wonder advisors aren't trusted by a large proportion of the population. Just as a matter of decency, I'd expect them to tell you. It could be argued that they're not acting in your best interests if they don't and are allowing themselves to be swayed by the fees they could charge you which could be a conflict of interest.

You need advice if the amount is over £30,000 (from http://www.legislation.gov.uk/uksi/2015/742/pdfs/uksi_20150742_en.pdf):

"The trustees or managers are not required to carry out the check in section 48(1) of the Act if the total value of the member!!!8217;s or survivor!!!8217;s subsisting rights in respect of safeguarded benefits under the pension scheme is £30,000 or less on the valuation date."

Yes, I'd have thought it'd become obvious early in the conversation with the IFA whether the OP was seeking "advice" or just wanted to transfer and though she was required to get an IFA to do it. But maybe it wasn't? You never know...

zagfles

dunstonh wrote: »

I totally disagree.

If you get a phone call asking you how much it costs to transfer a pension then you give the info. You answer questions as asked and go with the flow of the conversation.

Advisers give advice. If someone has phoned you saying they need advice on transferring a pension then that need for advice hasnt changed whether its £25k or £35k.

I would have thought it'd become obvious fairly quickly whether the client needs advice or thinks they are obliged to have it. Eg if they have plans on where to invest the pension.

And as IFAs can arrange plans cheaper than many DIY plans, who is to say that DIY will be cheaper.

Or the IFA might use a far more expensive plan because they can't put the customer in a postion where they could do something silly! As we've discussed before. Eg using expensive multi-asset rather than a sensible balance of cheaper single asset funds. Not to mention advice costs.

dunstonh

I would have thought it'd become obvious fairly quickly whether the client needs advice or thinks they are obliged to have it. Eg if they have plans on where to invest the pension.

Its hard to know how the call would have gone. They could have spoken to an administrator or assistant rather than an adviser (at our firm, the IFAs do not answer the main telephone line).

The OPs posts do not come across as someone that knows what they are doing, let alone what they want to do.

I come back to the point that the £30k requirement doesn't matter for IFAs. Someone doesn't magically gain knowledge just because their pension moves from £29,999 to £30,000. And someone how is irked about the 30k requirement is likely to say so in their call. As the OP was never subject to any 30k rule then why would it even come up?

Or the IFA might use a far more expensive plan because they can't put the customer in a postion where they could do something silly! As we've discussed before. Eg using expensive multi-asset rather than a sensible balance of cheaper single asset funds. Not to mention advice costs.

Yes, it could be cheaper or more expensive. Someone with a small amount is going to see most IFAs stick them in something simple. A simple transactional case in a multi-asset fund costing around 0.34% p.a. total. An initial advice fee but no ongoing. I also suspect most IFAs would say the value is too low for them deal with it.

Marcon

OP - you didn't spot the bit in the transfer value statement saying advice was needed for transfers of £30,000+?

sandsy

Marcon wrote: »

See dunstonh's reply above.

I did see it. In fact. it's exactly the reason I responded as I did.

Advisers have a duty to act in their client's best interest, to identify and manage conflicts of interest and to consider whether any advice they provide adds value once fees are taken into account.

Does taking 5% of the fund when there is no need add value? At the very least, it should have been discussed with the OP so that they can make their own mind up whether they want advice, even though they are not required to. It's fairly apparent that the OP isn't experienced in this area so taking advantage of this is simply not ethical.