Employer Contribution to Personal Pension

Grumpy_chap

Hello lovely people,

I hope someone can provide some good suggestions for me.

I will have a new employer for some of my work who, rather than pay into a company pension scheme will make employer contributions into any personal pension.  I like this idea as it means that everything is just all in one place.

However, my Pension Advisor says that the current pension is not able to receive contributions in this manner. 
The employer has commented that this is the first time they have had a pension refuse to accept such contributions.
Being stuck in the middle, I phoned the pension company directly, who advised they can accept the contributions in this manner but, as an "advisor-led" service, it can only be set up if facilitated by the advisor.  
The only way to break that offered by the pension company was to change pension advisor.

Changing pension advisor is not going to be a quick process, so I wondered whether there is a way I can get a new pension set up in the mean time that can take the employer contributions.  I am not sure how to go about this or where to start and I am none the wiser after a quick internet search (perhaps I used the incorrect criteria).  I sort of take the view that I could get any pension to start with that can accept the employer contributions and then, if that is under-performing, switch to something better and / or transfer the funds when I have more time to make a better decision.

As an aside, I've been disappointed with the growth (reduction) in value of my pension over the past year (but not sure how much growth is reasonable given COVID).  The pension advisor assures me the growth (reduction) on my scheme has been far better than most.  Looking at the paperwork today because of trying to sort the work stuff, I have noticed that of my monthly contributions, 25% is taken as various fees which seems extortionate to me.  What is normal?  It seems to me that, instead of paying the money to the pension and then fees of 25%, I could pay tax 20% then use a S&S ISA to achieve a better, simpler, and more flexible outcome.

Sorry there are a few points all wrapped up in this - any comments will be gratefully received.  My priority is getting something that facilitates employer contributions so that I do not lose the money from starting pay-run.

eskbanker

Grumpy_chap said:

Changing pension advisor is not going to be a quick process, so I wondered whether there is a way I can get a new pension set up in the mean time that can take the employer contributions.  I am not sure how to go about this or where to start and I am none the wiser after a quick internet search (perhaps I used the incorrect criteria).  I sort of take the view that I could get any pension to start with that can accept the employer contributions and then, if that is under-performing, switch to something better and / or transfer the funds when I have more time to make a better decision.

Just open a SIPP?

https://www.moneysavingexpert.com/savings/cheap-sipps/

Grumpy_chap

eskbanker said:

Grumpy_chap said:

Changing pension advisor is not going to be a quick process, so I wondered whether there is a way I can get a new pension set up in the mean time that can take the employer contributions.  I am not sure how to go about this or where to start and I am none the wiser after a quick internet search (perhaps I used the incorrect criteria).  I sort of take the view that I could get any pension to start with that can accept the employer contributions and then, if that is under-performing, switch to something better and / or transfer the funds when I have more time to make a better decision.

Just open a SIPP?

https://www.moneysavingexpert.com/savings/cheap-sipps/

Thanks, that article was one of the results I found from my internet search, but I found it rather confusing tbh.

Perhaps I am just exceedingly simple.

MallyGirl

that is extortionate charging -what is the advisor doing for that money?

Just open a SIPP and transfer the old pension in there. Then new employer contribution goes in too and gets grossed up. Putting it in an ISA loses you the tax breaks

xylophone

Why not just open a SIPP to receive the contributions from the new employer?

Example

https://www.hl.co.uk/help/sipp,-drawdown-and-annuity/sipp/contributions/can-my-employer-make-contributions

Grumpy_chap

MallyGirl said:

that is extortionate charging -what is the advisor doing for that money?

Getting rich?
I wonder what car he drives?
   

Albermarle

Maybe it is time to review whether you need a financial advisor at all . Why did you employ one in the first place?
Is it an Independent Financial Advisor , or one tied to a company ?

The charges seem unbelievably high , so maybe you are misreading them ? 
What does your agreement with the advisor say about charges ?

Also this does not really make sense .
However, my Pension Advisor says that the current pension is not able to receive contributions in this manner. 
Being stuck in the middle, I phoned the pension company directly, who advised they can accept the contributions in this manner but, as an "advisor-led" service, it can only be set up if facilitated by the advisor.  
The only way to break that offered by the pension company was to change pension advisor.

So the advisor says the pension can not take employer contributions , but the pension provider says they can . Something not right here .

As an aside, I've been disappointed with the growth (reduction) in value of my pension over the past year (but not sure how much growth is reasonable given COVID)

Again if you post some actual figures you should get some better feedback . The value change ( minus contributions ) between Jan 1st 2020 and today ( or the last figure you have and the date ) would be a good benchmark.

Grumpy_chap

Albermarle said:

Also this does not really make sense .
However, my Pension Advisor says that the current pension is not able to receive contributions in this manner. 
Being stuck in the middle, I phoned the pension company directly, who advised they can accept the contributions in this manner but, as an "advisor-led" service, it can only be set up if facilitated by the advisor.  
The only way to break that offered by the pension company was to change pension advisor.

So the advisor says the pension can not take employer contributions , but the pension provider says they can . Something not right here .

Sorry if I was not clear.

The new employer says they will make employer contributions into any pension scheme.

I asked my advisor, who advised this was not possible with my pension.

The employer expressed surprise saying that they've never not been able to make the employer contributions into an existing scheme.

Pushed back with the above to my advisor, who was adamant that the scheme could not receive such contributions.  Several loops between employer and advisor, with the advisor getting more adamant each time and bringing in all sorts of claims about excessive administration each month and in default of taxation rules etc.  The extra admin would mean a fee of £500 + Vat each month to cover the costs dah-de-dah-de-dah

Phoned the pension company who confirmed they can receive the payments, it is simple and all automated but, as an "advisor-led product" needs to be initiated by the advisor in a "two-clicks" process that will take "moments".

Phoned the advisor.  Told them what the pension company said.  Got a load of excuses and waffle, but no agreement to sort it.

Hopefully that is clearer.

Albermarle said:

Again if you post some actual figures you should get some better feedback . The value change ( minus contributions ) between Jan 1st 2020 and today ( or the last figure you have and the date ) would be a good benchmark.

05/01/2020 = £217k
05/07/2021 = £262k
Contributions (regular plus a transfer in) = £66k

Albermarle said:

Maybe it is time to review whether you need a financial advisor at all . Why did you employ one in the first place?
Is it an Independent Financial Advisor , or one tied to a company ?

Employed an IFA to bring potted pensions from various employers into one place.  Done in 2019.

Frankly, I could have stuck the money under the bed and burnt a pile each winter to keep warm and be better than the current scheme.

Albermarle

Phoned the pension company who confirmed they can receive the payments, it is simple and all automated but, as an "advisor-led product" needs to be initiated by the advisor in a "two-clicks" process that will take "moments".
Phoned the advisor.  Told them what the pension company said.  Got a load of excuses and waffle, but no agreement to sort it.
Hopefully that is clearer.

Your explanation is very clear but still a bit of a mystery what is going on .

One guess is that contributions can be made to pensions from after tax income, and in this case the pension provider will automatically add tax relief. However employer contributions will not attract any tax relief. 

So it could be that your contributions attract tax relief and the employers do not, and the pension can not handle this . It is possible that whoever you spoke to at the pension provider did not fully understand . Often the call centre staff are rather inexperienced . It is just a guess !

05/01/2020 = £217k
05/07/2021 = £262k
Contributions (regular plus a transfer in) = £66k

So effectively you have seen a small loss. A typical medium risk pension investment portfolio would have risen maybe 5%? over that period, despite the Covid drop last year ,  but there will be considerable variation. Could be the effect of the 25% cut the advisor,  takes but that also seems very unusual . Normally they make an initial charge for doing all the initial legwork and then a % charge of your total fund , usually no more than 1 % .

You need to look at the agreement you originally made with the advisor to check what it says about charges .

Grumpy_chap

Albermarle said:

Your explanation is very clear but still a bit of a mystery what is going on .

One guess is that contributions can be made to pensions from after tax income, and in this case the pension provider will automatically add tax relief. However employer contributions will not attract any tax relief. 

So it could be that your contributions attract tax relief and the employers do not, and the pension can not handle this . It is possible that whoever you spoke to at the pension provider did not fully understand . Often the call centre staff are rather inexperienced . It is just a guess !

I agree it is confusing.  It is not as you suggested.  

My current regular contributions are from my own Ltd Co.  Taken as DD (which is fine as I have control of the business account).  All employers contributions.

The new employer, obviously I suppose, will not accept DD but will pay by BACS.  These will be employer contributions also.  

The person I spoke with at the pension provider appeared to understand the difference between employer and employee contributions and explained that the definition of this (or the split) is what needs to be done by the advisor - the simple process that takes "moments".

It does still seem to be a mystery and the advisor seems to be the challenge.

Albermarle said:

So effectively you have seen a small loss. A typical medium risk pension investment portfolio would have risen maybe 5%? over that period, despite the Covid drop last year ,  but there will be considerable variation. 

You need to look at the agreement you originally made with the advisor to check what it says about charges .

So, I think I calculate a loss around 7.5% versus average growth 5% - my portfolio is meant to be "medium risk".

The really annoying thing is that the advisor sends lovely graphs always showing my plan as the best-performer, which I have mentioned to him before as implausible.  He simply responds that it shows how well the fund is doing and, tbh, it is hard to find reliable comparators simply on the web.

Yes, I need to find the charges details.  No idea where they are.  Perhaps, the most important charge is to understand what happens if I tell the current advisor to take his leave.

QrizB

Grumpy_chap said:

The really annoying thing is that the advisor sends lovely graphs always showing my plan as the best-performer, which I have mentioned to him before as implausible.  He simply responds that it shows how well the fund is doing and, tbh, it is hard to find reliable comparators simply on the web.
Yes, I need to find the charges details.  No idea where they are.  Perhaps, the most important charge is to understand what happens if I tell the current advisor to take his leave.

Do you know exactly what funds you are invested in? If so, we (or you) can look them up at eg. Trustnet and see how they are doing. But I agree with the other posters, this sounds odd. Boring old VLS60 is up 16% since the start of 2020 (link).