Do I trust this Financial advisor over my FSAVC?

AyJaydee

Can someone please give me a sanity check over my gut feelings?
One problem is that I really don't trust financial advisors as I feel they are really motivated by their commission and not my best interests and I'm not really money astute.


I am nearly 63 and am in the 3rd year with my current employer and paying into a company pension. Some years back, I was advised to take out a FSAVC, I pay just over £200 a month into it, money invested in a 'FPP Managed Fund'; it 'matures' when I am 65, projected payout of over £100k.



Taking up an offer of a review of my pension by the company that manages my company scheme, I agreed to see their financial advisor. Looking at my finances, he immediately latched onto the FSAVC and said that I should not have it at all. He said that I would be better off not paying any more into it and redirecting my monthly payments into the company pension (SMART) instead.


Even better, he continued.... " I can find another plan that would work harder and return considerably more than the pittance you are earning with this", he said. I think he said his commission was 2% on the transfer value.

Perhaps redirecting into the company SMART scheme is more efficient, but I don't know if there would be any penalties involved.

However, alarm bells rang at the thought of transferring to a new scheme; it would have to work 'very' hard to offset the cost of his commission in two years.


He is coming back in January. Am I right to trust my gut feeling?
Please help, I am worried sick by this. Thank you.

LHW99

You need to understand whether this person is an Independent financial adviser or not.
Nevertheless, whichever that person is, you need to feel comfortable working with them, else you won't ever feel happy.
First of all, if you stopped paying into the FSAVC, and put the money into the company scheme, would the company increase their contributions? If so, it may be a good idea to do that.
It might also be good if the charges on the company scheme are less than on the FSAVC. Do you know about those?

What "other plan" does this adviser suggest?

dunstonh

One problem is that I really don't trust financial advisors as I feel they are really motivated by their commission and not my best interests and I'm not really money astute.

That is illogical since there is no commission.

Taking up an offer of a review of my pension by the company that manages my company scheme, I agreed to see their financial advisor. Looking at my finances, he immediately latched onto the FSAVC and said that I should not have it at all. He said that I would be better off not paying any more into it and redirecting my monthly payments into the company pension (SMART) instead.

Is that an FA or an IFA?
If it is an FA and they are an appointed rep of the pension provider then you are effectively speaking to a salesperson.

Even better, he continued.... " I can find another plan that would work harder and return considerably more than the pittance you are earning with this", he said. I think he said his commission was 2% on the transfer value.

Walk away. Commission has been banned since the end of 2012. It is only allowed on non-advised business.

However, alarm bells rang at the thought of transferring to a new scheme; it would have to work 'very' hard to offset the cost of his commission in two years.

I have done thousands of pension transfers over the years and a modern plan against a legacy plan (FSAVCs were abolished in 2006. So, we knows its a legacy plan) and the breakeven period is usually within 2-4 years.

He is coming back in January. Am I right to trust my gut feeling?

There are alarm bells. The mention of commission for example (when its not allowed). Also, you say its an FA. Whereas you should be using an IFA. And the mention of "another" plan. That suggests rather than the workplace scheme.

However, broadly speaking, I would not be surprised to find a modern plan coming in at lower cost than the old one and potentially lower cost than the employer scheme. You should be presented with a cost comparison which shows the differences. That may come back in the January visit but should be presented prior to application.

xylophone

If you are uncomfortable with this adviser, you could always look for an independent financial adviser specialising in pension/retirement advice.

Do you want to transfer the FSAVC elsewhere or are you content with the projected value at age 65?

With regard to redirecting this contribution to the company pension scheme, when you say "SMART" do you mean that your scheme uses salary sacrifice or are you specifically referring to this

https://www.autoenrolment.co.uk/member

Have you checked on your state pension position?

https://www.gov.uk/check-state-pension

Do you have other pensions in addition to the above?

AyJaydee

Thank you all for the replies so far. This has helped to direct my thinking.
It can also do no harm if I contact this provider myself and ask a few questions. i.e:
What are their charges?
Is there a terminal bonus?
Any penalty if I stop paying in?
I also think it's a lump-sum payout, but this pension man said that it's a monthly payout; so I need confirmation of this?


With regards comments so far:
It is a salary sacrifice scheme. I was contributing up to the point that my employer stops contributing also, but I recently increased my payments to a few percent past this cut-off point. (I either put a small surplus in the current pension pot, spend it, or save in my ISA.)


Yes, I have other pots, previous employers pension plans and I'm contributing to an employers share-save plan. The FSAVC is my largest 'pot' though.
I get full state pension when I pass 66, so 3 and a bit years to go on that.
My gut feeling is that the FSAVC is so close to maturing, I might as well leave it alone.


Has anyone any other thoughts? Something that I may have missed? Thank you.

TrickyDicky101

What do you plan to do with the .£100k that is within the plan that matures in 2 years' time when you are 65?

If you plan to make use of it immediately then paying a 2% fee to transfer the existing pot elsewhere is highly unlikely to make economic sense under any circumstances.

cloud_dog

dunstonh wrote: »

Walk away. Commission has been banned since the end of 2012. It is only allowed on non-advised business.

dunstonh wrote: »

There are alarm bells. The mention of commission for example (when its not allowed).

I don't believe the advisor is really talking 'commission', the OP has probably represented the fee using the commission term. For those not keeping up to speed with the change (irrespective of how long ago it was) it is not an unusual faux pas.

xylophone

It can also do no harm if I contact this provider myself and ask a few questions. i.e:
What are their charges?
Is there a terminal bonus?
Any penalty if I stop paying in?
I also think it's a lump-sum payout, but this pension man said that it's a monthly payout; so I need confirmation of this?

Do you have a policy document/key facts leaflet etc concerning this pension?

If not, you could write to the insurer and request clarification.

With regard to the "monthly pay out", I am puzzled by this.

Is it to do with an annuity offered under the policy?

Is there a Guaranteed Annuity Rate?