Pension adviser charges

MNrhubarb

Sorry in advance if this post sounds ignorant, but I have had the same pension adviser now for around 8 years. I pay 0.75% on top of the charges on my pension portfolio and he does an annual review, although most of the time I have to remind him that it's time for our review.
Obviously my pension has gone down like most other people's but as I am nearing 50 I wanted to top it up as I was disappointed with the projected £2k pa I would get on retirement, so I called him for a review. We arranged I would increase payments from £80 per month to £120 with the government contributing 25%. He now says that they will take around 2% from my direct debits (he assumed I knew about this, but I admit I have not noticed any charges from my direct debits) on top of the 0.75% overall and that reviews are now twice a year. He said that basically the government top up of 25% is free money to me, so I'm still getting a good deal and they are only taking 2% of what the government are giving me.
This may be perfectly normal and even cheap charges for a pensions adviser, but whilst 0.75% was cheap overall for a yearly review, the 2% on a monthly direct debit doesn't sound very cheap to me. He says he will email me a breakdown of the costs, but I really don't know what they normally charge so I don't know if this is reasonable or not.
Can anyone please advise?

Albermarle

0.75% a year is a pretty typical charge ( in fact you seem to have a relatively small pension so 1% would be more normal )but charging a % cut on direct debits/contributions is not normal.
You could of course DIY and save the fee altogether if you would be comfortable with that .

MNrhubarb

Thanks, I did wonder that. I don't mind the overall charge but this was the first time he mentioned charging me per direct debit. That means everytime I make a monthly payment they take out 2% on top of the annual charge. I didn't think this was right but he convinced me that it was just them taking from the government's free money they are giving me and it was all reasonable. However it's not 'free' money is it? It's a tax rebate? 
I don't want to DIY it but I do want a financial adviser that is honest and up front about such charges. I have lost faith in this one a bit which is a shame as I've been with the company for 8 years and we used their mortgage adviser too. I think I'll see what he sends as a breakdown of charges. I just didn't want to raise an issue if this was all above board and I was being silly.

Prism

MNrhubarb said:

Thanks, I did wonder that. I don't mind the overall charge but this was the first time he mentioned charging me per direct debit. That means everytime I make a monthly payment they take out 2% on top of the annual charge. I didn't think this was right but he convinced me that it was just them taking from the government's free money they are giving me and it was all reasonable. However it's not 'free' money is it? It's a tax rebate? 
I don't want to DIY it but I do want a financial adviser that is honest and up front about such charges. I have lost faith in this one a bit which is a shame as I've been with the company for 8 years and we used their mortgage adviser too. I think I'll see what he sends as a breakdown of charges. I just didn't want to raise an issue if this was all above board and I was being silly.

You are absolutely right, its not free money at all. Just this statement alone would cause me to look elsewhere. If someone is going to charge you a fee for something then they should be completely honest about it.

MNrhubarb

I don't know why but I always feel intimidated over money. You are right, it is a small pension pot and ideally I'd like someone to help me to grow that, but this time he just advised to leave it where it was and was almost discouraging me from increasing monthly payments, saying that the kids are still at home, we still have a mortgage to pay and perhaps to think about that, so I reduced my initial estimate because he seemed to be talking me out of it. Then when he mentioned the fees he did so in such a way that I felt foolish questioning it. 
I think it's time I found a new adviser. What would be the consequences though to my pension portfolio if I dropped my pension adviser? 

dunstonh

Obviously my pension has gone down like most other people's 

No obvious about it.  Most people are now either back in profit to pre coronavirus levels or thereabouts (depending on risk profile).

but as I am nearing 50 I wanted to top it up as I was disappointed with the projected £2k pa I would get on retirement,

Projections are synthetic and not that accurate.   They use artificial assumptions which, in most cases, will be significantly lower than what is achievable in reality.    A case of playing it safe and encouraging you to pay more.   

He now says that they will take around 2% from my direct debits (he assumed I knew about this, but I admit I have not noticed any charges from my direct debits) on top of the 0.75% overall and that reviews are now twice a year. 

That method of remuneration is no longer allowed on regular contributions.  Only on ad-hoc single payments.    (technically it is -allowed on regular payments but only for 12 months. i.e. 12 months payments could have 2% deducted from them but not beyond).  It is not allowed to be open ended.

This may be perfectly normal and even cheap charges for a pensions adviser, but whilst 0.75% was cheap overall for a yearly review, the 2% on a monthly direct debit doesn't sound very cheap to me. 

£120 top up is £2.40.   As it can only be for 12 months, that is £2.40x12 = £28.80

I don't want to DIY it but I do want a financial adviser that is honest and up front about such charges. 

The adviser has told you the charges.

I just didn't want to raise an issue if this was all above board and I was being silly.

For £28.80 it does seem to be a bit strange to be moaning about it.

zagfles

Prism said:

MNrhubarb said:

Thanks, I did wonder that. I don't mind the overall charge but this was the first time he mentioned charging me per direct debit. That means everytime I make a monthly payment they take out 2% on top of the annual charge. I didn't think this was right but he convinced me that it was just them taking from the government's free money they are giving me and it was all reasonable. However it's not 'free' money is it? It's a tax rebate? 
I don't want to DIY it but I do want a financial adviser that is honest and up front about such charges. I have lost faith in this one a bit which is a shame as I've been with the company for 8 years and we used their mortgage adviser too. I think I'll see what he sends as a breakdown of charges. I just didn't want to raise an issue if this was all above board and I was being silly.

You are absolutely right, its not free money at all. Just this statement alone would cause me to look elsewhere. If someone is going to charge you a fee for something then they should be completely honest about it.

Exactly - it's YOUR tax rebate, not the IFAs. The idea that it's all "free money" is no better than the shysters who want a cut of other tax rebates like the marriage allowance. They are charging for a service, you need to weigh up whether you're getting value for money for that service. Maybe look at sites like monevator, or options like Pension Bee. Or find a cheaper IFA, or one who doesn't assume the right to part of YOUR tax rebate because it's "free". 

MNrhubarb

@dunstonh - that reply of 'moaning about it' is exactly why I tend to get ripped off, because I'm too damn scared to speak up! I failed maths, dismally. I am now a grown woman of 48 years old with a mortgage, savings, bills and a good job. I do all the bills, I calculate savings and interest rates, I find us the best deal, yet when I come across something I don't understand I revert to the little girl who is afraid to speak out in case I am made to look foolish.
I came on here specifically to ask if I was being foolish and started my initial post with an apology, yet you still felt compelled to tell me that I am 'moaning'. I am not. I am asking the question here because I am too scared to actually ask him how come he is charging me 2% for every direct debit payment. 
I did not know that this can only be for 12 months, so thank you for that. He didn't tell me that and yes, he has been upfront about the 2% but in that way people do when they make you feel like an idiot for even questioning it. And he did refer to the government contribution as 'free money' to me, so I shouldn't begrudge him the extra 2% because it's the government's money they are taking their cut from and not mine. But that doesn't make sense to me.
I have always paid 0.75% to the company for pensions advice. My pension is small. I get a review once a year that I usually remind them of. I would have been happy if he had increased this overall payment. I don't begrudge the guy needing to earn a living too. But I was a bit shocked that 2% of my regular direct debits (which are not very large) would be taken by them and that I was supposed to know about this. I have checked my paperwork and there is no mention of it anywhere, so it seems this is a new thing they have introduced. I don't know whether that is because I wanted to increase my payments or just a company-wide charge they have introduced on all direct debits. 
Thanks for all the input. As I said, I'll wait to see what any breakdown says and I feel a bit more confident now in questioning the monthly charge.

Albermarle

Whatever you do , do not stop contributing as you will benefit from it in the end .
Although you do not mention it, I presume you are not working and therefore not benefiting from a workplace pension?
In any case you can contribute more than £120 a month and still get the tax relief . The maximum for a non earner is £2880 pa ( £240 a month ) 

dunstonh

I came on here specifically to ask if I was being foolish and started my initial post with an apology, yet you still felt compelled to tell me that I am 'moaning'. I am not. I am asking the question here because I am too scared to actually ask him how come he is charging me 2% for every direct debit payment. 

You said in your post "I just didn't want to raise an issue if this was all above board and I was being silly."   You added that "I came on here specifically to ask if I was being foolish "

I didn't want to call you silly or foolish so I changed the word to moan as I felt it is less cruel than using your words.   It was more a turn of phrase that £28.80 seemed a small figure to query when the 0.75% is likely to be 10-30 times that amount (depending on your value)

I did not know that this can only be for 12 months, so thank you for that. He didn't tell me that and yes, he has been upfront about the 2% but in that way people do when they make you feel like an idiot for even questioning it.

It is a mandatory requirement to disclose charges before they are taken and expectation is that you would sign a fee agreement laying out the charges before you are committed to pay them. 

I personally suspect he is mistaken and that 2% is the charge for single/ad hoc payments.  Maybe he is not the investment adviser for the firm and is an agent for the adviser firm.  This often happens where advisers have dropped their investment class permissions to go mortgage/insurance only and they have someone else in the firm doing the investment side.  The "old" adviser retains the face to face contact as that is where the relationship is.   (just trying to think of why an adviser would not know their own charges).

Normally, regular contributions for non-servicing clients are in the 25-50% range of year 1 or portion of year 1.    Indeed, for servicing clients, often there are no initial charges as you are paying for that ongoing servicing.

You can ask for a copy of the firm's tariff at any time.  All firms are required to have one.

And he did refer to the government contribution as 'free money' to me, so I shouldn't begrudge him the extra 2% because it's the government's money they are taking their cut from and not mine. But that doesn't make sense to me.

I didn't particularly like that phrasing either but others had already covered that and saw no need to repeat.  

MNrhubarb

Thank you @dunstonh and yes, I am my own worst critic. I assume I am being foolish or silly before I even write the damn post! I am not moaning if it is like you say, only for 12 months. He made out however that this 2% would come out of all my direct debit payments going forward. 
I shall have to study the costs breakdown carefully and will look at the website to see if they have a list of tariffs. 
@Albermarle I took this private pension on when I was self employed and could only afford small monthly payments. Since then I've increased my payments twice. I am now in contracted employment and have a pension there too, but as I've only been with them for 4.5 years there is not much in that pot. I didn't see any reason to stop my private pension as I intend to take a staged retirement. That is, take out of my private pension from the age of 60 or 62, then out of my workplace pension at 65 then state pension at 67. Having seen that I would get just over £3k pa from my private pension (I know this is a projection) I was keen to pay more whilst I could afford to do so.