are these fees excessive?

Noqlu

I am fast approaching 75 and have decided not to take an annuity. My pension provider is Aviva and I cannot remain in the same policy. I have decided with my IFA to transfer my pension to Royal London and write it into trust for my four grandchildren.
In a letter to me he states, ----to draft the application, transfer paperwork, (isn't this the same as draft the application?) death benefit nominations and trustee letter (one and the same surely?) and recommendation report (not sure what this is), he proposes to charge 1% of the transfer value as a one off. The money will be taken from the pension fund.

The actual amount they will take with be approx £2000 which is a little less than all the gain the policy made last year. The ongoing fee will be 0.6%
This seems to me excessive. Is it? is there an alternative?

jaybeetoo

What’s to stop you doing the transfer and telling the new SIPP provider who the beneficiaries are?

I’m not a a fan of IFAs charging a percentage. The amount of work required to transfer £200,000 is the same as £100,000 so why charge twice as much?

dunstonh

I have decided with my IFA to transfer my pension to Royal London and write it into trust for my four grandchildren.

Writing a trust for a pension complicates things and introduces potential tax issues. Most people find using the expression of wish meets their needs.

In a letter to me he states, ----to draft the application, transfer paperwork, (isn't this the same as draft the application?) death benefit nominations and trustee letter (one and the same surely?) and recommendation report (not sure what this is), he proposes to charge 1% of the transfer value as a one off. The money will be taken from the pension fund.

1% is good value. Indeed, you would probably recover that charge within 18-24 months compared to the charges on your old Aviva pension. I would be charging 2% but with a cap leading to a similar charge.

As you are using a trust instead of an expression of wish, this increases the work and the liability. The recommendation report is a summary of the recommendation (typically around 15 pages). A regulatory requirement to be issued.

The actual amount they will take with be approx £2000 which is a little less than all the gain the policy made last year.

Which is irrelevant.

This seems to me excessive. Is it? is there an alternative?

How much do you think it should cost?

You are free to not take advice and DIY. Not sure what trust-based arrangements are like with DIY providers but I am sure you could find out.

Paul_Herring

Not sure what trust-based arrangements are like with DIY providers but I am sure you could find out.

Before, not after, the fact I hope...

Dox

Noqlu wrote: »

I have decided with my IFA to transfer my pension to Royal London and write it into trust for my four grandchildren.

Why? What do you hope to achieve by introducing extra complexity? An Expression of Wish/Nomination Form should be just as effective.

Noqlu

Thank you for your replies.
I had assumed that all that was required was to complete an application form, name the grandchildren to whom the fund would go on my death, - they will keep the funds in the pension and take it when they wish.
I couldn't imagine that this was more than one day's work, so £2000 is a very good day rate.
I can't imagine what takes 15 pages in the recommendation report? We have to move the fund and we have agreed where it will go. Is there something else I have missed?

Noqlu

Thank you for your comment Dox. It seems I have made a mistake in saying it will be written into trust. What Is meant is death benefit nominations; on my death the fund goes to my grandchildren.
And will be the start of a pension fund for them.

kidmugsy

I'd do a DIY transfer to one provider and then transfer onwards 50% to another provider, so that I have some diversification over providers and their IT systems.

For each provider I'd complete an expression of wishes form, saying "equal proportions to each grandchild, please". I'd give the names and addresses of each existing grandchild. I think that would be that. If one grandchild dies early you are covered, if another one pops up you are also covered.

The only complication might be if one died before you, leaving offspring or, say, a pregnant wife. It shouldn't be too hard to cover that - you could perhaps adapt wording from your will.

dunstonh

I had assumed that all that was required was to complete an application form, name the grandchildren to whom the fund would go on my death, - they will keep the funds in the pension and take it when they wish.

The latter bit is where a trust comes in. However, most people dont bother with that bit and stick with the expression of wish.

couldn't imagine that this was more than one day's work, so £2000 is a very good day rate.

It's not pure profit. All the costs have to come out of it first. Pension switches (DC to DC are higher risk transactions)

I can't imagine what takes 15 pages in the recommendation report?

All the reasons why transferring the pension is suitable. All the risk warnings and any alternatives that could be considered potentially suitable. Investment detail and cost comparisons.

We have to move the fund and we have agreed where it will go. Is there something else I have missed?

About 10 hours work with about a third to a half going in costs (excluding tax and support staff costs).

Noqlu

It's not pure profit. All the costs have to come out of it first. Pension switches (DC to DC are higher risk transactions)

What costs? and what do you mean DC to DC are higher risk transactions?

About 10 hours work with about a third to a half going in costs (excluding tax and support staff costs).[/QUOTE]

Again, am I missing something what costs?

dunstonh

What costs?

FCA, FSCS, MAS, FOS levies etc. PI insurance, electricity, heating, staff, equipment, research software, professional qualifications and ongoing training, third-party compliance support etc etc.

and what do you mean DC to DC are higher risk transactions?

A transfer between two defined contribution schemes. If you placed IFA advice into levels of risk, this transaction is at the higher end. Not the highest but it requires specialist software and the PI insurers take a bit more interest in them than say an ISA contribution.