Drawdown / pension approach

Pat38493

Worth noting that IFAs can take their fees directly from your pension pot so the advice is from before tax money (this might seem obvious but I was not aware of it until recently or maybe just hadn’t thought it through).

Albermarle

Daffodil1234 said:

Again, thanks to all who have commented - extremely useful.

For Cus who asked about the cost of an IFA - It could be in future I will decide to use an IFA but the intention right now is to gain as much knowledge as possible myself first. My aim is to create an approach that will work long term for us so I'd want more than just a one-off assessment.  

Out of interest, I'd previously looked up the estimated cost (using Which who state "The Financial Conduct Authority (FCA) says advisers charge an average of 2.4% of the amount invested for initial advice and 0.8% a year for ongoing advice (1.9% p.a with underlying product and portfolio charges factored in)".     The main area that I may make choices on (the DC pot) would therefore create an adviser charge of 2.4% = £9,600 -   that's a lot of fees.  

There are lots of threads on here about using IFA's and the costs involved, and I have to say generally that this forum is a better source of info than Which on financial matters.
Initial advice from an IFA with fair pricing will be up to 3%, but that % will reduce the bigger the pot is. In your case it might only be 1%. Ongoing charges for an £800K pot should be 0.5%
A simple investment portfolio of mainly passive trackers + the platform charge might be 0.5%.
So 1% pa in total. Although that would be very much at the low end and maybe 1.2%/1.3% would be more typical and some will charge more by delegating part of the work and using more expensive funds.
If you go to a large national Wealth Management company then 2.4% would be closer to the mark in some cases.

dunstonh

Out of interest, I'd previously looked up the estimated cost (using Which who state "The Financial Conduct Authority (FCA) says advisers charge an average of 2.4% of the amount invested for initial advice and 0.8% a year for ongoing advice (1.9% p.a with underlying product and portfolio charges factored in)".    

The problem with using figures like that is the size of the sample and when it was taken.  The last one I saw from the regulator, it was 1.8% initial and 0.7% p.a. but it changes frequently depending on source.

The second problem is that its the average.    So, you are including the sales reps taking 5% or 6% as well as the IFAs taking 0.5-2%.    Also, the underlying investment charge will largely depend on whether you use an FA (which will usually be fully active funds at maximum cost) or tell the IFA you have an index tracker preference.

 The main area that I may make choices on (the DC pot) would therefore create an adviser charge of 2.4% = £9,600 -   that's a lot of fees.  

And many IFAs would cringe at a charge that high.  £2,500-£3,500 would be ballpark target.

And as mentioned above, it can be taken from the pension.  Or alternatively, you can pay the fee amount into the pension, get tax relief on it.  Then draw enough tax free cash to leave the crystallised amount enough to pay the IFA fee from crystallised funds rather than uncrystallised.  Therefore getting tax relief and avoiding income on it.