IFA - dB pension transfer fees

Mick70

I have posted this on my CETV thread , but as I’m running out of time and posters may not reply to that one.. just wanted to quickly ask ... on a transfer of approx value 1.7m , if the IFA has quoted 2% upfront (34k!), and then 0.75% annual fees - is that about right ? Was bit surprised at the upfront fee although this may well be the norm , I honestly have no idea
Mick

AnotherJoe

2% from what I've read is pretty cheap. It might cost you a bit less than that if it can be taken from your pension since you'll have the ?55%? tax and maybe it will reduce what you get, and that tax will dwarf the 34k by about 10x if my fag packet is correct.


0.75% ongoing seems high for such a large sum I'd want a discount down to more like 0.5%.

Dorian1958

Towards the end of 2018, I paid 1.25% on a CETV of £395K with ongoing management fees of 0.5%. My IFA is no longer doing DB to DC transfers. Could be prices have risen as the perceived risk to IFAs in respect of future claims has increased.

Dorian1958

Sorry it was the end of 2017 not 2018 that my transfer took place.

davidwatts

I know of several people who transferred out of the same scheme recently. Some used the paid for advice provided by the employer but others paid for their own, many going with the same firm. Figures of 1.5 and 2% were mentioned and I'm aware of one firm who capped that at £15k.

Thrugelmir

Rising cost of professional indemnity insurance will be a factor. Advisors are withdrawing from the DB transfer market voluntarily. Following a review by the FCA into over 3,000 firms over a 3 year period. As too much of advice given is still not of an acceptable standard.

SonOf

2% needs to be in context with the amount. in this case, £34k is high. However, you have a number of complex issues and the liability is significant. And in the scheme of things, £34k is a drop in the ocean. It could be as little as a few weeks performance on the investments.

0.75% ongoing on that amount is far too high. 0.50% is the dominant figure.

With a bit more phoning around, you could get the initial down (but still expect it to be high) but more importantly, get that ongoing fee down to at least 0.5%.

wjr4

I can’t believe you are asking if £34k is an acceptable initial fee?! That’s madness. There is no way IFAs should be charging £34k for a DB transfer. They should cap the charge. Look around for someone else!

Aegis

Mick70 wrote: »

I have posted this on my CETV thread , but as I’m running out of time and posters may not reply to that one.. just wanted to quickly ask ... on a transfer of approx value 1.7m , if the IFA has quoted 2% upfront (34k!), and then 0.75% annual fees - is that about right ? Was bit surprised at the upfront fee although this may well be the norm , I honestly have no idea
Mick

I don't know how that firm addresses the problem of contingent charging, as they will presumably get £34k if you transfer and nothing if you don't making it very much more likely that they will want you to transfer.


Find a firm that does it on a fixed fee basis. To give a ball park, my firm is Central London based and would charge £7,500 for one DB scheme from start to finish (additional schemes should cost more, but not linearly, as some of the work will be done already when the first scheme is analysed). You will therefore probably find cheaper outside London if you look.


Definitely don't pay £34k for this work.

segovia

Mick70 wrote: »

I have posted this on my CETV thread , but as I’m running out of time and posters may not reply to that one.. just wanted to quickly ask ... on a transfer of approx value 1.7m , if the IFA has quoted 2% upfront (34k!), and then 0.75% annual fees - is that about right ? Was bit surprised at the upfront fee although this may well be the norm , I honestly have no idea
Mick

My advice would be to stick with the DB, I have been down this path myself and you are at risk of signing up for the 0.75% fees for the rest of your life. Take the risk-free option, you will be better off in the long run. Ff you live for another 30 years you will be handing over neary £400,000.00

Aegis

segovia wrote: »

My advice would be to stick with the DB, I have been down this path myself and you are at risk of signing up for the 0.75% fees for the rest of your life. Take the risk-free option, you will be better off in the long run. Ff you live for another 30 years you will be handing over neary £400,000.00

Don't make the mistake of focusing so much on the IFA's fee that you ignore the possibility of a transfer without ongoing advice being a good idea. If the scheme is offering, for example, 50 times the annual income, then this might represent £34,000 per annum vs a fund of about £1.5 million (after lifetime allowance), which is an annual withdrawal of 2.3% plus inflation to match benefits AND maintain the capital value of the pension at £1.5 million for potential beneficiaries.



If this transfer took place and if the investor then decided they needed an IFA, they would probably focus much more on the outcome (i.e. a seven figure sum for their heirs) rather than how much it cost. This demonstrates the difference between price and value - the latter is far more important.


Of course, this skips the point that the client can always choose to fire their IFA and manage investments themselves. As such, you can just pay the up front fees (which for this size should be on a fixed fee basis) and then have nothing to do with that adviser ever again. If they know this in advance, this can even help with managing conflicts of interest even further than usual.



Yes, the majority of people shouldn't transfer out, but there are definitely cases where the transfer is beneficial, and it is very difficult to simply say that someone will be better off in the long run without knowing the particulars of the offer or the views of the potential investor.