Drawdown - is the fee I am being charged by a Financial Advisor too high?

Linton

Sunnylifeover50plan said:

Do most people pay 3.5% when taking their 25% tax free element and leaving the rest invested? Isn't the OP at risk of spending a fair amount of money potentially needlessly?

In most cases most people would not need any advice simply to take the 25% tax free though there are circumstances such as old pensions which do not permit you to take the 25% and leave the rest invested or taking the 25% tax free is a seriously bad idea where paying for advice could be highly beneficial especially if you do not understand what it all means.

However the bigger problem was identified by the OP: 

I need advice on what to do with the remainder as I have never invested before. 

If you really dont have a clue doing something foolish could cost you a lot more than 3.5% as could not doing anything at all through worry and indecision.

EdSwippet

Linton said:

However the bigger problem was identified by the OP: 

I need advice on what to do with the remainder as I have never invested before. 

If you really dont have a clue doing something foolish could cost you a lot more than 3.5% as could not doing anything at all through worry and indecision.

Agreed. However, the statement "I have never invested before" left me wondering what the current pension is held in.

Assuming it's a straightforward DC pension (SIPP, GPP or similar) and not something exotic, you would imagine that the most straightforward course would be to take the 25% but leave everything else in either the exact same funds, or equivalents. For this, 3.5% of assets could be considered to be a pretty outsized but largely unnecessary expenditure.

Albermarle

EdSwippet said:

Linton said:

However the bigger problem was identified by the OP: 

I need advice on what to do with the remainder as I have never invested before. 

If you really dont have a clue doing something foolish could cost you a lot more than 3.5% as could not doing anything at all through worry and indecision.

Agreed. However, the statement "I have never invested before" left me wondering what the current pension is held in.

Assuming it's a straightforward DC pension (SIPP, GPP or similar) and not something exotic, you would imagine that the most straightforward course would be to take the 25% but leave everything else in either the exact same funds, or equivalents. For this, 3.5% of assets could be considered to be a pretty outsized but largely unnecessary expenditure.

That is what I thought as well, but with the caveat that the current pension may be badly invested. For example if it was in some types of lifestyle funds it may be low in equities and high in cash.

OP - Can you say what investment(s) are in your current pension and the % of each ( if more than one )?

Linton

EdSwippet said:

Linton said:

However the bigger problem was identified by the OP: 

I need advice on what to do with the remainder as I have never invested before. 

If you really dont have a clue doing something foolish could cost you a lot more than 3.5% as could not doing anything at all through worry and indecision.

Agreed. However, the statement "I have never invested before" left me wondering what the current pension is held in.

Assuming it's a straightforward DC pension (SIPP, GPP or similar) and not something exotic, you would imagine that the most straightforward course would be to take the 25% but leave everything else in either the exact same funds, or equivalents. For this, 3.5% of assets could be considered to be a pretty outsized but largely unnecessary expenditure.

Perhaps the money is currently invested ultra-cautiously and need not be or perhaps it is not and the OP wants it all in cash in the next 5 years.  Who knows? We dont and neither perhaps does the OP.   The OPs requirements need to be determined and appropriate funds and management strategy chosen.  Expectations may need to be changed.  There is more to this sort of thing than fund picking, the precise fund(s) to be used is perhaps the least important decision.

With all trades-people there is a minimum charge below which it is not worth the overheads of doing the job.  Hence £50 for 5 minuters to change a tap washer.  Ultimately charges are controlled by the market.  

EdSwippet

Linton said:

EdSwippet said:

Linton said:

However the bigger problem was identified by the OP: 

I need advice on what to do with the remainder as I have never invested before. 

If you really dont have a clue doing something foolish could cost you a lot more than 3.5% as could not doing anything at all through worry and indecision.

Agreed. However, the statement "I have never invested before" left me wondering what the current pension is held in.

Assuming it's a straightforward DC pension (SIPP, GPP or similar) and not something exotic, you would imagine that the most straightforward course would be to take the 25% but leave everything else in either the exact same funds, or equivalents. For this, 3.5% of assets could be considered to be a pretty outsized but largely unnecessary expenditure.

Perhaps the money is currently invested ultra-cautiously and need not be or perhaps it is not and the OP wants it all in cash in the next 5 years.  Who knows? We dont and neither perhaps does the OP.   The OPs requirements need to be determined and appropriate funds and management strategy chosen.  Expectations may need to be changed.  There is more to this sort of thing than fund picking, the precise fund(s) to be used is perhaps the least important decision.

With all trades-people there is a minimum charge below which it is not worth the overheads of doing the job.  Hence £50 for 5 minuters to change a tap washer.  Ultimately charges are controlled by the market.  

Well aware of all of this. But thank you for the lecture, anyway.

dunstonh

Do most people pay 3.5% when taking their 25% tax free element and leaving the rest invested?

I refer you to my post made just before yours.

David_Drummond

Thank you for all your comments. My question has brought forth a volley of other questions, some of which I do not understand. Anyway, I will try to give more information below:

This pension plan dates back to 1988 (!) and does not have the options that more modern plans have. While I can draw the tax free 25%, the remainder cannot then stay where it is but must be transferred out & reinvested. Back in the 80s I took out a private pension via Allied Dunbar with Zurich. I am already drawing an annuity from that pension. The firm that arranged that is attached to this account also and has told me that the balance of cash after the 25% could be invested more effectively than currently. 

As I understand your answers, there is nothing to stop me requesting the 25% myself and asking Zurich to simply transfer the balance to a modern plan without recourse to an advisor, or paying anything. Am I correct?

The 3.5% (£3500) is a lot of money to me. According to the terms I have been given, it is for 'advice & implementation' and pays for devising an investment strategy, selecting an investment provider if applicable, completing all documentation and processing applications.

There is also a regular premium payable equal to 35% of the first 12 months contribution if I wish an ongoing advisory service.

From what you all say, this all seems very expensive given the relatively small sum involved.

Any further advice you can offer would be much appreciated.

OldMusicGuy

I don't know if you can take the 25% first and then transfer, but it's easy to transfer an Allied Dunbar/Zurich pension to a more modern plan for nothing. I have transferred two such old plans myself. No need to pay anyone anything.

I would suggest you transfer to a modern platform  first and then decide what to do. Give yourself some time as it's worth understanding the difference between the pension platform and then the investments within the platform. There are many options available but make sure you really want to pay someone a lot of money before you do so. You might be able to make some simple decisions yourself. 

For example, if this isn't your main pension and you want to draw it down fairly quickly, you could transfer it all to Hargreaves Lansdown, hold it all as cash and draw it out over several years to minimise tax (you can take the tax free amount up front or pro rata as you make withdrawals). If you hold it as cash it costs you nothing on the HL platform, but of course you lose out to inflation as they don't pay you interest on it (well only a tiny amount).

However, if this is part of your longer term planning and an important part of your pension, you might need to invest the 75K for the long term and you might need the help of an independent financial advisor. Or you might not. Have a read of this book if you haven't already: "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" (by John Edwards).

 

Albermarle

As above if you find a new pension provider, you can open an account with them online and request that they start to organise the transfer of your Zurich pension to them, Of course you need to give the new provider the details of the Zurich plan, but there is no need to inform Zurich of what you intend to do, although it is possible they will call you at some point just to check you want the transfer to go ahead.
If you take the 25% first, it will slow the process down and you may have to go through a more manual process. So better just to transfer the whole lot first. When asked you should ask for the transfer in cash, probably you will not have any choice anyway.
It could take one week to a few weeks.
When the cash arrives request the 25% tax free. As said above if you think you will withdraw this 75% quite quickly ( over three years say) the could be best to leave it as cash.
If you want to take the pension more gradually it will be better to invest it. For inexperienced investors each pension provider has to offer four standardised investment portfolios for drawdown. So called investment pathways. Pick the one that suits you and then invest the remaining 75% in that. They are not as personalised as an IFA one but should be OK for your needs. You can always change it later if necessary,  Here is an example from one provider but they are all pretty much the same .
Investment Pathways | What is investment pathways? | Fidelity

dunstonh

As I understand your answers, there is nothing to stop me requesting the 25% myself and asking Zurich to simply transfer the balance to a modern plan without recourse to an advisor, or paying anything. Am I correct?

Nothing stopping you asking but Allied Dunbar no longer exist and Zurich have no products available direct to consumers.