SJPs 6% entry charge for pension clients & EWC

Pat38493

PJR2000 said:

artyboy said:

Indeed, the OP is preaching to the choir by posting this here. But then they have also cross posted this on the Savings and Investments board so I wonder if they are trying to drum up support for some formal action against SJP.

The ex-PPI ambulance chasers are already circling here...

I work in financial services but not in claims management. I started looking into SJP following an FT article at the beginning of Sept that referenced the EWC because i know that deferred sales charges are not understood, including by those that sell them.

Following the 17th Oct announcement on changes to charges not one single article i read online, including by some quite prominent journalists, showed they had any understanding of how SJP works. This included a Citywire article quoting a fund manager who is one of their biggest shareholders who publicly admitted even he didn't understand them. Go figure his investment case.

Just trying to shed some light for those that might want to know.

Even if we accept this, I suppose the obvious follow up question is - have SJP been making it crystal clear to all investors that they are effectively paying a 6% up front charge?  If not, could they be in trouble from a regulatory perspective.

michaels

PJR2000 said:

I POSTED THIS ORIGINALLY ON THE S&I BOARD TODAY AND THEN REALISED THE PENSIONS BOARD WAS PROBABLY BETTER - PLEASE EXCUSE THE DUPLICATION

On 17th Oct SJP announced various changes to their product charges, including pensions. There have also been various comments since asking why the Early Withdrawal Charge has not been waived for existing pension clients.

The reason behind this is because SJP charge 6% up front on day 1 as a Deferred Sales Charge. This means for a £100k pension moved to SJP you immediately lose £6k, leaving you £94k. On your account statement you will then be shown an "Account Value" of £100k and a "Surrender Value" of £94k.

Assuming no mkt movements for simplicity sake, over the next 6 years the Account Value will reduce by 1% per annum until it too eventually reaches the same £94k as the Surrender Value. However, at all times you will only have had £94k in your pension pot. The initial £100k Acct Value is essentially meaningless.

If a client then switches their pension away after say 3 years, only 3% of the 6% DSC taken on day 1 will have been "expensed" by that point. So your Account Value is now £97k compared to your Surrender Value and actual pension pot of £94k. This means an EWC needs to apply to write off the residual £3k of the DSC not yet expensed.

For the EWC to be waived for existing clients SJP would have to refund the residual portions of the commissions they took upfront to those clients that leave in the first 6 years.

The EWC doesn't apply if you stay invested for more than 6 years because after that point it becomes redundant, since the 6% DSC has by then been fully expensed. Your Acct Value will now match your Surrender Value more or less.

The problems with DSCs generally in financial services can include:

1. Clients stay invested longer to "avoid" the EWC. Not realising it's just an acctg tidy up of a charge they already paid on day 1.
2. Clients may believe that the Surrender Value is only relevant to them if they leave their provider. It is actually the only relevant number they should ever look at.
3. Clients may believe they have £100k invested when its only £94k.


Would welcome any comments from SJP pension clients to see how the DSC, EWC and Surrender Value were explained to you??


For interest sake, the table below also shows the increase in charges for new pension clients from 2025 onwards (excludes underlying fund charges) over the first 10 yrs. The new structure works out more expensive for 17-18 yrs before turning in the clients favour, according to the SJP CFO on their 17th Oct webcast.

PJR2000 said:

I POSTED THIS ORIGINALLY ON THE S&I BOARD TODAY AND THEN REALISED THE PENSIONS BOARD WAS PROBABLY BETTER - PLEASE EXCUSE THE DUPLICATION

On 17th Oct SJP announced various changes to their product charges, including pensions. There have also been various comments since asking why the Early Withdrawal Charge has not been waived for existing pension clients.

The reason behind this is because SJP charge 6% up front on day 1 as a Deferred Sales Charge. This means for a £100k pension moved to SJP you immediately lose £6k, leaving you £94k. On your account statement you will then be shown an "Account Value" of £100k and a "Surrender Value" of £94k.

Assuming no mkt movements for simplicity sake, over the next 6 years the Account Value will reduce by 1% per annum until it too eventually reaches the same £94k as the Surrender Value. However, at all times you will only have had £94k in your pension pot. The initial £100k Acct Value is essentially meaningless.

If a client then switches their pension away after say 3 years, only 3% of the 6% DSC taken on day 1 will have been "expensed" by that point. So your Account Value is now £97k compared to your Surrender Value and actual pension pot of £94k. This means an EWC needs to apply to write off the residual £3k of the DSC not yet expensed.

For the EWC to be waived for existing clients SJP would have to refund the residual portions of the commissions they took upfront to those clients that leave in the first 6 years.

The EWC doesn't apply if you stay invested for more than 6 years because after that point it becomes redundant, since the 6% DSC has by then been fully expensed. Your Acct Value will now match your Surrender Value more or less.

The problems with DSCs generally in financial services can include:

1. Clients stay invested longer to "avoid" the EWC. Not realising it's just an acctg tidy up of a charge they already paid on day 1.
2. Clients may believe that the Surrender Value is only relevant to them if they leave their provider. It is actually the only relevant number they should ever look at.
3. Clients may believe they have £100k invested when its only £94k.


Would welcome any comments from SJP pension clients to see how the DSC, EWC and Surrender Value were explained to you??


For interest sake, the table below also shows the increase in charges for new pension clients from 2025 onwards (excludes underlying fund charges) over the first 10 yrs. The new structure works out more expensive for 17-18 yrs before turning in the clients favour, according to the SJP CFO on their 17th Oct webcast.

How would they justify showing a 6% charge that is taken immediately as being payable over 6 years - the only possible reason would be to obscure the size of the initial charge which would seem to be pretty close to 'false advertising'.

FIREDreamer

michaels said:

At £50k for a £1m pension pot, I hope they are extremely good biscuits that the advisor brings round.....

Caviar topped

PJR2000

michaels said:

PJR2000 said:

I POSTED THIS ORIGINALLY ON THE S&I BOARD TODAY AND THEN REALISED THE PENSIONS BOARD WAS PROBABLY BETTER - PLEASE EXCUSE THE DUPLICATION

On 17th Oct SJP announced various changes to their product charges, including pensions. There have also been various comments since asking why the Early Withdrawal Charge has not been waived for existing pension clients.

The reason behind this is because SJP charge 6% up front on day 1 as a Deferred Sales Charge. This means for a £100k pension moved to SJP you immediately lose £6k, leaving you £94k. On your account statement you will then be shown an "Account Value" of £100k and a "Surrender Value" of £94k.

Assuming no mkt movements for simplicity sake, over the next 6 years the Account Value will reduce by 1% per annum until it too eventually reaches the same £94k as the Surrender Value. However, at all times you will only have had £94k in your pension pot. The initial £100k Acct Value is essentially meaningless.

If a client then switches their pension away after say 3 years, only 3% of the 6% DSC taken on day 1 will have been "expensed" by that point. So your Account Value is now £97k compared to your Surrender Value and actual pension pot of £94k. This means an EWC needs to apply to write off the residual £3k of the DSC not yet expensed.

For the EWC to be waived for existing clients SJP would have to refund the residual portions of the commissions they took upfront to those clients that leave in the first 6 years.

The EWC doesn't apply if you stay invested for more than 6 years because after that point it becomes redundant, since the 6% DSC has by then been fully expensed. Your Acct Value will now match your Surrender Value more or less.

The problems with DSCs generally in financial services can include:

1. Clients stay invested longer to "avoid" the EWC. Not realising it's just an acctg tidy up of a charge they already paid on day 1.
2. Clients may believe that the Surrender Value is only relevant to them if they leave their provider. It is actually the only relevant number they should ever look at.
3. Clients may believe they have £100k invested when its only £94k.


Would welcome any comments from SJP pension clients to see how the DSC, EWC and Surrender Value were explained to you??


For interest sake, the table below also shows the increase in charges for new pension clients from 2025 onwards (excludes underlying fund charges) over the first 10 yrs. The new structure works out more expensive for 17-18 yrs before turning in the clients favour, according to the SJP CFO on their 17th Oct webcast.

PJR2000 said:

I POSTED THIS ORIGINALLY ON THE S&I BOARD TODAY AND THEN REALISED THE PENSIONS BOARD WAS PROBABLY BETTER - PLEASE EXCUSE THE DUPLICATION

On 17th Oct SJP announced various changes to their product charges, including pensions. There have also been various comments since asking why the Early Withdrawal Charge has not been waived for existing pension clients.

The reason behind this is because SJP charge 6% up front on day 1 as a Deferred Sales Charge. This means for a £100k pension moved to SJP you immediately lose £6k, leaving you £94k. On your account statement you will then be shown an "Account Value" of £100k and a "Surrender Value" of £94k.

Assuming no mkt movements for simplicity sake, over the next 6 years the Account Value will reduce by 1% per annum until it too eventually reaches the same £94k as the Surrender Value. However, at all times you will only have had £94k in your pension pot. The initial £100k Acct Value is essentially meaningless.

If a client then switches their pension away after say 3 years, only 3% of the 6% DSC taken on day 1 will have been "expensed" by that point. So your Account Value is now £97k compared to your Surrender Value and actual pension pot of £94k. This means an EWC needs to apply to write off the residual £3k of the DSC not yet expensed.

For the EWC to be waived for existing clients SJP would have to refund the residual portions of the commissions they took upfront to those clients that leave in the first 6 years.

The EWC doesn't apply if you stay invested for more than 6 years because after that point it becomes redundant, since the 6% DSC has by then been fully expensed. Your Acct Value will now match your Surrender Value more or less.

The problems with DSCs generally in financial services can include:

1. Clients stay invested longer to "avoid" the EWC. Not realising it's just an acctg tidy up of a charge they already paid on day 1.
2. Clients may believe that the Surrender Value is only relevant to them if they leave their provider. It is actually the only relevant number they should ever look at.
3. Clients may believe they have £100k invested when its only £94k.


Would welcome any comments from SJP pension clients to see how the DSC, EWC and Surrender Value were explained to you??


For interest sake, the table below also shows the increase in charges for new pension clients from 2025 onwards (excludes underlying fund charges) over the first 10 yrs. The new structure works out more expensive for 17-18 yrs before turning in the clients favour, according to the SJP CFO on their 17th Oct webcast.

How would they justify showing a 6% charge that is taken immediately as being payable over 6 years - the only possible reason would be to obscure the size of the initial charge which would seem to be pretty close to 'false advertising'.

Makes it seem more palatable to the investor...

As per one of my other replies just earlier, the cash impact is the same as an initial upfront charge. It leaves in full on full on day 1 to pay the commissions regardless. The rest of it is just window dressing.

PJR2000

Pat38493 said:

PJR2000 said:

artyboy said:

Indeed, the OP is preaching to the choir by posting this here. But then they have also cross posted this on the Savings and Investments board so I wonder if they are trying to drum up support for some formal action against SJP.

The ex-PPI ambulance chasers are already circling here...

I work in financial services but not in claims management. I started looking into SJP following an FT article at the beginning of Sept that referenced the EWC because i know that deferred sales charges are not understood, including by those that sell them.

Following the 17th Oct announcement on changes to charges not one single article i read online, including by some quite prominent journalists, showed they had any understanding of how SJP works. This included a Citywire article quoting a fund manager who is one of their biggest shareholders who publicly admitted even he didn't understand them. Go figure his investment case.

Just trying to shed some light for those that might want to know.

Even if we accept this, I suppose the obvious follow up question is - have SJP been making it crystal clear to all investors that they are effectively paying a 6% up front charge?  If not, could they be in trouble from a regulatory perspective.

I have yet to find any financial services firm in the industry where DSCs & EWCs are widely understood. This obviously creates a potential issue that those firms may then (even inadvertently) make comments to clients that are simply not accurate in relation to charges & valuations. Bear in mind, clients can't complain about something they don't even know might be an issue.

I have no personal experience of how SJP approach this with their pension clients, so cannot offer any authoritative comment with regards to how they manage it to ensure accuracy.

Before posting anywhere publicly I sent an depth report I wrote to the FCA a couple of weeks ago. In their hands now what they choose to do about it or not. I have also highlighted to one of the SJP independent board directors for their attention.

Mothman

I guess the crux will be what the documentation says that SJP pension clients were been given detailing these charges and whether this coincides with what the client was told by their advisor\salesperson. Given they are renowned for being very slick, I would guess SJP would have got their documentation right and that proving your advisor\salesperson explained the EWC differently however many years ago will be difficult.

OP thanks for highlighting this as it is different to how I understood their EWC charge, though thankfully I have never been an SJP client.