Drawdown pension charges

GDJTAM

I have a small pension pot of £70k and I am happy with my IFA choice of investment portfolio. I am also happy with his one off charge.

I will either be taking a small regular weekly drawdown that will last around 4 years, or I may just dip in and out of the pot when required.

My IFA has asked if I want the pot managed for 1% per annun on the total investment. The provider charges 0.50% on my total investment each year and has an average return of circa 6%  (on a low risk) over the past 5 years. 

Because it's only a relatively small investment, do I need an IFA to manage it or am I being too sceptical in thinking it's just easy money for the IFA?

wjr4

It’s not easy money for the IFA, in fact it would be the opposite. Do you feel you need help from an IFA? If not, you won’t need ongoing advice. 

wjr4

Also, does the 0.5% include fund charges? Or is that just the provider charge, as that seems high? Which provider is it with? 

Albermarle

and has an average return of circa 6%  (on a low risk) over the past 5 years. 
A typical medium low risk multi asset fund has increased only 6 or7% over 5 years. So only just over 1% pa.
So maybe the IFA is saving you money in this case!

Linton

With many SIPP providers (it may be all) you cannot take a weekly drawdown since they only run the PAYE payroll once a month. It could also be a major amount of work.  Are you proposing to sell a small amount of your investments every week?

Dipping in and out of a pension pot is not so easy either since the provider may need something like 3-6 weeks notice of any new withdrawal with the cash being available in the account at least 2 weeks before the payroll is run.

It would be much easier for you to drawdown say once or twice  a year and put the money into an instant access savings account.

GDJTAM

Linton said:

With many SIPP providers (it may be all) you cannot take a weekly drawdown since they only run the PAYE payroll once a month. It could also be a major amount of work.  Are you proposing to sell a small amount of your investments every week?

Dipping in and out of a pension pot is not so easy either since the provider may need something like 3-6 weeks notice of any new withdrawal with the cash being available in the account at least 2 weeks before the payroll is run.

It would be much easier for you to drawdown say once or twice  a year and put the money into an instant access savings account.

The fund says " You’re in complete control - enjoy a regular income, or dip in and out whenever you like. Allowing you to take more money when you need it and less when you don't". So I should be okay to dip in and out. But, you have got me thinking about taking lump sums now and again instead so thank you

GDJTAM

wjr4 said:

It’s not easy money for the IFA, in fact it would be the opposite. Do you feel you need help from an IFA? If not, you won’t need ongoing advice. 

I couldn't think of an appropriate way of saying does the IFA actually do anything during the year, so my 'easy money ' term may be a bit crass. 

I'm unsure as to whether I need ongoing support from the IFA. He was excellent in sorting my Employers pension out and giving me advice in my other pensions.

It's an DC plan and I have 2 options to invest. Either Royal London or Quilter.

I couldn't think of an appropriate way of saying does the IFA actually do anything during the year, so my 'easy money ' term may be a bit crass. 

I'm unsure as to whether I need ongoing support from the IFA. He was excellent in sorting my Employers pension out and giving me advice in my other pensions.

I couldn't think of an appropriate way of saying does the IFA actually do anything during the year, so my 'easy money ' term may be a bit crass. It wasn't meant to be derogatory, just a poor way of asking a question.

I'm unsure as to whether I need ongoing support from the IFA. He was excellent in sorting my Employers pension out and giving me advice in my other pensions.

It's an DC plan and I have 2 options to invest. Either Royal London or Quilter. 0.50 is ongoing fund charges by the provider 

wjr4

Why Quilter? Does the adviser work for Quilter? Seems an odd choice for a pension. 

wjr4

You need to find out the provider charge too if that’s the fund charges. 

dunstonh

Because it's only a relatively small investment, do I need an IFA to manage it or am I being too sceptical in thinking it's just easy money for the IFA?

Its not easy money for the IFA.   The amount of work on ongoing servicing is intensive now.   Many professionals bemoan the creation of audit trails and documentation for documentation's sake and the advice is no exception to that.

Some clients create a lot of work. Other clients create less.
Some strategies require more work. Some require less

The most simple of strategies can be very low work and easily achievable DIY with a bit of understanding.  Some of the strategies require a lot more knowledge and understanding (especially where they are multi-wrapper).  Some people can still do that DIY very successfully.    I have clients that could do that successfully but they choose to use us because they have better things to do with their time.  I have clients that I can explain it again and again and just don't get it and need me to do it for them.

I have four drawdown cases to do in the next week or two, and two of them will be transactional (one off) as the amounts and needs don't justify ongoing, the other two will be ongoing servicing because of the phasing, multi-wrapper use, bucketing strategy and comfort required.     

So, it really comes down to you.

The fund says " You’re in complete control - enjoy a regular income, or dip in and out whenever you like. Allowing you to take more money when you need it and less when you don't". So I should be okay to dip in and out. But, you have got me thinking about taking lump sums now and again instead so thank you

I'm surprised a fund says that.   I can imagine the pension provider saying that but that isn't a good description for a fund.

It's an DC plan and I have 2 options to invest. Either Royal London or Quilter.

Royal London is a popular option for transactional advice clients.  Quilter is a decent platform but I find it too expensive and with other platforms lower cost for using the same software as quilter, I don't use them.   However, Quilter do offer special terms to many advisers and it could he has obtained decent special terms.       Quilter offered me special terms but their special terms were not as good as the others.    Your adviser could be different and got better terms with quilter (or he could be an FA rather than an IFA - there is an FA network that has a limited panel that has quilter and RL on their product list).

RL can support bucketing method or a single governed portfolio.  They cannot suport yielding method.  Total return only.  They also support a cash float, albeit with no discretion of when its refloated.
Quilter can support bucketing, yielding or total return.   Their software configuration can make bucketing a bit more awkward than other platforms using the same software.    They have platform cash within each wrapper (so cash float is possible) but lack an external cash account (which is a pain when using multiple wrappers).   They are whole of market for investments (although your adviser may not be if they are an FA and not an IFA).

So, I will repeat it really comes down to you.   However, if you intend to DIY, then you should consider a third option which is to use a provider that focuses on DIY investors and not try and use a provider that focuses on advice clients.

GDJTAM

dunstonh. Thank you so much for a well informed, extremely helpful reply. It is greatly appreciated. I copied and pasted the wording from the RL drawdown site but I added the word Fund? The site actually uses the term flexible savings. Sorry for the confusion.