Independent Financial advisor fees on pension

SARAHB_3

Hi use an IFA for my pension.  I have never had to pay for the advice/work they do as they take it from my pension.  They have recently put there "ongoing advice fee" up to 0.75% equates to £670 roughly a year.  My question I need help with is; should I just pay they yearly fee myself or is it better to come out of the pension?

Albermarle

I have never had to pay for the advice/work they do as they take it from my pension.

So you are paying for it .

My question I need help with is; should I just pay they yearly fee myself or is it better to come out of the pension?

The question is not should you somehow withdraw from having a pension, but whether you need an IFA to manage it or not. As we do not know you, how much you know about investing, or are prepared to learn, or even how old you are , or how large the pension is, etc etc it is impossible to make any sensible comment.

dunstonh

I have never had to pay for the advice/work they do as they take it from my pension. 

You have always had to pay for it.  Whether you pay for it from the pension or your bank account, you are still paying it.

 They have recently put there "ongoing advice fee" up to 0.75% equates to £670 roughly a year.

That is the ballpark of expectation and doesn't sound unreasonable.   Broadly speaking, you generally find smaller values are around 1% and then firms tier downwards through 0.75% to 0.50% (variations apply) as the fund values get higher.

 My question I need help with is; should I just pay they yearly fee myself or is it better to come out of the pension?

We cannot answer that.    It depends on whether you value their service and whether you can do the things that they do (or are willing to do).

Dazed_and_C0nfused

I don't think the op is suggesting dispensing with the IFA, more questioning whether she should pay their few as a separate transaction outside of the pension wrapper.

One disadvantage of that (assuming it's possible) is that you would be paying £670.

Withing the pension you've really only paid £536, HMRC have effectively paid the other £134 in the form of tax relief you received by putting the money in the pension in the first place.

dunstonh

I don't think the op is suggesting dispensing with the IFA, more questioning whether she should pay their few as a separate transaction outside of the pension wrapper.

Ahh, good spot.

In which case, the answer is, to always pay from the pension.      The pension value has had tax relief on contributions.   So, effectively, the fee is getting tax relief.   i.e. if you paid £670 directly, it has cost you £670.  If you paid £536 into the pension, tax relief is £134, making £670 gross.   So, the net effect is that paying directly would cost £670. Paying via the pension costs £536. (assuming basic rate or lower).

Beddie

SARAHB_3 said:

Hi use an IFA for my pension.  I have never had to pay for the advice/work they do as they take it from my pension.  They have recently put there "ongoing advice fee" up to 0.75% equates to £670 roughly a year.  My question I need help with is; should I just pay they yearly fee myself or is it better to come out of the pension?

What do you get for your £670 per year? Is it a letter twice a year to say all is well, but please phone if any queries? Lot of money for a printed letter and a couple of stamps. what have they actually done over the past 3 years? You could cancel the ongoing advice and tell them you will contact them should the time come to make any changes.

Of course, you may be happy with the arrangement, in which case continue as you are. Or you could at least ask them to justify the increase. As fund prices have dropped so has their ongoing income - are they simply passing on the cost (to them) of your losses back to you? 

Remember you are also paying a platform fee and fund charges, which will of course continue.

Ibrahim5

I have just paid £47 to have an MOT on my car. I will soon pay £50 for a dental check up. Both activities require far more skill, knowledge and equipment than a pension review. There is no reason whatsoever that they should be charging more than £50 a year. Total ripoff. Your question shows exactly why they can get away with it.

LHW99

How long do your dental checkups last? Mine are around 15 mins, maybe a bit longer if there's an x-ray. Privately that's close to twice that cost. An IFA annual review (I'm guessing) would take rather longer for the background research, reporting and some sort of discussion with the client either face to face / by phone. Plus presumably there will be other work during the year for compliance etc?

Pleanty of people either don't have, or don't want to have that sort of hands on. No blame to them, I wouldn't touch plumbing no matter what and will pay the cost, as you have to with any professional.

I would not personally use an IFA (at least just now) because I am a control freak that enjoys fiddling. But if I reckoned the time I spend just reading and monitoring I think I could easily justify that sort of cost in £ per hour over a year.

[Deleted User]

LHW99 said:

Pleanty of people either don't have, or don't want to have that sort of hands on. No blame to them, I wouldn't touch plumbing no matter what and will pay the cost, as you have to with any professional.

I would not personally use an IFA (at least just now) because I am a control freak that enjoys fiddling. But if I reckoned the time I spend just reading and monitoring I think I could easily justify that sort of cost in £ per hour over a year.

If we are talking about the ongoing investment management then this comparison does not work. Once investments are set up, assuming you use mutual funds or ETFs, there is nothing to do except for rebalancing.  That should take 30min a year and could be easily avoided by using a single multi-asset fund.  There is zero need to fiddle and monitor. In fact, it’s counterproductive. 

Linton

The main point of an annual review by an IFA, is surely not to discuss fiddling with the details of th portfolio.  Of far greater benefit is to review progress against objective and to discuss any changes in the customer’s circumstances. These may lead to changes to the portfolio or to the objectives but rather more likely something simple like changing the level of contributions or drawdown as appropriate.

[Deleted User]

Linton said:

The main point of an annual review by an IFA, is surely not to discuss fiddling with the details of th portfolio.  Of far greater benefit is to review progress against objective and to discuss any changes in the customer’s circumstances. These may lead to changes to the portfolio or to the objectives but rather more likely something simple like changing the level of contributions or drawdown as appropriate.

“Contribute as much as possible, whenever you can.” “Draw in accordance with the original plan”.  There. Annual review done.