Opinions please: Are these pension charges typical, or am I being ripped off?

dunstonh

When I started my pension and ISA, I paid 3% initial advisor charge on most of the money that I paid in.  Recently this has decreased to 2%.  When I told my advisor I was thinking of moving, he said he would waive the paying in charge altogether if I stayed.

Initial charges are only allowed on single contributions or regulars in the first 12 months for new business arranged from 2013 onwards.   You cannot be charged initial fees for regular payments made after 12 months.

My ongoing charges have been around 1.81%.  This includes 0.75% ongoing advisor charge + 0.31% platform charge + 0.75% typical ongoing funds charge.  

That is in the ballpark but could be improved on.

Some of my investments are in actively managed funds, and others in passively managed funds.  

Are you sure?    Hybrid portfolios are very commonplace but the Fund OCF tends to be around 0.2x% to 0.4x%.   you say 0.75%.   However, fully active portfolios tend to be around 0.75%.

Are you including the transaction charges figure in that 0.75%?  If so, disregard that column as its not a real charge but a synthetic one. 

My advisor says that he can reduce the overall figure to around 1.25% if I agree to moving my investments into more passively managed funds.  The 0.75% ongoing advisor charge includes free financial advice whenever I need it, which has been really helpful.

Correction.  The 0.75% ongoing fee is for ongoing financial advice.   (its not free if its costing you).  Most advisers providing ongoing servicing will do top ups with no initial charges.

 I spoke to someone on the MoneyHelper website and they said that they can't advise me because they have to be impartial.

That is not correct.   They should have aid that they cannot advise you because they are neither qualified nor regulated to give advice—nothing to do with being impartial.

 I imagine I'll need to pay for advice but I don't know which advisor to approach.  

You are already paying for advice.   However, there are two types of adviser.  IFAs and FAs.   IFAs are whole of market and independent.   FAs are restricted in what they can offer from the marketplace.   All salesforces are FAs.     So, you should make sure your adviser is an IFA.

I was thinking that if my advisor is offering to waive the paying in charge, I could move some of my money elsewhere and then move it back there without a penalty if it performs worse.

There shouldn't be any paying in charge if it was set up after 2012.  It's rare for investment platforms to charge any initial charges.   Only the adviser.   So, how are you making your contributions? (regular direct debit or ad-hoc)?

You say you started in 2018. So, there should be no initial charges currently on any regular contributions you are paying.  That would be a breach of regulations.

However, you are not in a position to make that decision in an informed way.  For example, 2022 was a negative year for nearly all investments.  2023 continues to be negative for most fixed interest securities.   Gilts have had thier worst period in over 100 years.    The losses are down to the investments, not the adviser.  

The greater the quantity of fixed interest securities in your portfolio, the greater the loss.     The other major loss area was tech stocks.  Great from 2018 to 2021 but had a very large crash in 2021/22 (dot.com mk2).  Typically around 40%.  So, again, if you are heavier in tech stocks, then your losses would be heavier in that period.

Silver66

Albermarle said:

Silver66 said:

Hello,

I'm 41 and self employed.  Five years ago I started both a personal pension and a stocks and shares ISA through a financial planning company that was recommended to me by a friend.

Granted that the last five years have been rocky for many investors, but I'm worried about the performance of my pension and ISA.  When I checked last week, both were down 2% since inception in 2018.  I had paid a huge amount in charges:  the charges had eaten up all of the HMRC tax relief that I had received on my pension, and eaten into my savings on top of that.  This does not sound right. Are you saying that the all the 25% tax relief you get has disappeared in charges? How can that have happened when the charges are 1.8% ?
--> I have both a pension and a stocks and shares ISA with them.  The 1.8% charges are taken from the whole amount.  I have more money in the ISA than I do in the pension.  That's why 1.8% of the whole portfolio has eaten up the tax relief I got on my pension contributions.

I am thinking of switching my pension and ISA to somewhere else, and I'm doing some research to see if the charges I'm paying are typical.

When I started my pension and ISA, I paid 3% initial advisor charge on most of the money that I paid in. Normally you pay 2 or 3 % of the funds you already have. I suppose if you had no funds to begin with, then charging on contributions was another way of paying. Recently this has decreased to 2%.  When I told my advisor I was thinking of moving, he said he would waive the paying in charge altogether if I stayed. Good

My ongoing charges have been around 1.81%.  This includes 0.75% ongoing advisor charge + 0.31% platform charge + 0.75% typical ongoing funds charge.  Some of my investments are in actively managed funds, and others in passively managed funds.  My advisor says that he can reduce the overall figure to around 1.25% if I agree to moving my investments into more passively managed funds.  The 0.75% ongoing advisor charge includes free financial advice whenever I need it, which has been really helpful. These charges are not abnormal, but obviously 1.25% is better than 1.8%

I just wanted to know if these charges are typical.  Does anyone know where I can find this out?  I spoke to someone on the MoneyHelper website and they said that they can't advise me because they have to be impartial.  I imagine I'll need to pay for advice but I don't know which advisor to approach.  If anyone could help I'd be grateful.

Granted that the last five years have been rocky for many investors, but I'm worried about the performance of my pension and ISA.  When I checked last week, both were down 2% since inception in 2018
For me the apparent poor performance is more of a concern than the charges. The last couple of years have been a bit flat/down, but I would have expected to see some growth since 1998, despite the high fees.
What are you actually invested in?
-->  For confidentiality I'd rather not say, but it's a mixture of actively managed and passive funds.  My advisor has offered me the option of increasing the proportion invested in passive funds, to lower the charges.  I don't  feel that I know enough about investing to make an informed decision about this.  I want to educate myself about it but I'm not sure where to start.

Hi Albermarle, Many thanks for your reply.  Please see my replies in bold and italic.  (It's a shame I can't choose a different text colour!)

JohnWinder

I want to educate myself about it but I'm not sure where to start.

Tim Hale’s book Smarter Investing. Start there, you probably won’t need to go any further.

Silver66

Thanks for your reply, LHW99.  You asked:  Might it make a difference when in 2018 they were started? 2018 was a negative year I think (was for me anyway), and the last couple of years have been up / down depending on exactly what you were invested in.

I started both the pension and ISA in October 2018, and made additional contributions gradually over the years.

Albermarle

JohnWinder said:

I want to educate myself about it but I'm not sure where to start.

Tim Hale’s book Smarter Investing. Start there, you probably won’t need to go any further.

Plus keep reading the forum !

Silver66

MEM62 said:

Silver66 said:

No, it wasn't them, it was a different financial planning company but I'd rather not name them here.

You will never get the best advice and you will always pay high charges when using such companies.  Call them what you like - financial planning, wealth management - they all similar.  What you want is proper advice from an IFA.  

Hi MEM62, Thanks for your reply.  My advisor is an IFA, although employed by that company.  He says he's advising what he believes is in my best interests.  But obviously he and the company are profiting from my investments.  He says our interests are aligned because we both want my investments to grow.  

I want to get advice elsewhere, but I'm not sure where to go.  There are thousands of IFAs out there and I'm not sure who to approach.  If anyone knows where I could get advice on my situation either for free or at a low cost, I'd be grateful.

EthicsGradient

Silver66 said:

Albermarle said:

Silver66 said:

Hello,

I'm 41 and self employed.  Five years ago I started both a personal pension and a stocks and shares ISA through a financial planning company that was recommended to me by a friend.

Granted that the last five years have been rocky for many investors, but I'm worried about the performance of my pension and ISA.  When I checked last week, both were down 2% since inception in 2018.  I had paid a huge amount in charges:  the charges had eaten up all of the HMRC tax relief that I had received on my pension, and eaten into my savings on top of that.  This does not sound right. Are you saying that the all the 25% tax relief you get has disappeared in charges? How can that have happened when the charges are 1.8% ?
--> I have both a pension and a stocks and shares ISA with them.  The 1.8% charges are taken from the whole amount.  I have more money in the ISA than I do in the pension.  That's why 1.8% of the whole portfolio has eaten up the tax relief I got on my pension contributions.

I am thinking of switching my pension and ISA to somewhere else, and I'm doing some research to see if the charges I'm paying are typical.

When I started my pension and ISA, I paid 3% initial advisor charge on most of the money that I paid in. Normally you pay 2 or 3 % of the funds you already have. I suppose if you had no funds to begin with, then charging on contributions was another way of paying. Recently this has decreased to 2%.  When I told my advisor I was thinking of moving, he said he would waive the paying in charge altogether if I stayed. Good

My ongoing charges have been around 1.81%.  This includes 0.75% ongoing advisor charge + 0.31% platform charge + 0.75% typical ongoing funds charge.  Some of my investments are in actively managed funds, and others in passively managed funds.  My advisor says that he can reduce the overall figure to around 1.25% if I agree to moving my investments into more passively managed funds.  The 0.75% ongoing advisor charge includes free financial advice whenever I need it, which has been really helpful. These charges are not abnormal, but obviously 1.25% is better than 1.8%

I just wanted to know if these charges are typical.  Does anyone know where I can find this out?  I spoke to someone on the MoneyHelper website and they said that they can't advise me because they have to be impartial.  I imagine I'll need to pay for advice but I don't know which advisor to approach.  If anyone could help I'd be grateful.

Granted that the last five years have been rocky for many investors, but I'm worried about the performance of my pension and ISA.  When I checked last week, both were down 2% since inception in 2018
For me the apparent poor performance is more of a concern than the charges. The last couple of years have been a bit flat/down, but I would have expected to see some growth since 1998, despite the high fees.
What are you actually invested in?
-->  For confidentiality I'd rather not say, but it's a mixture of actively managed and passive funds.  My advisor has offered me the option of increasing the proportion invested in passive funds, to lower the charges.  I don't  feel that I know enough about investing to make an informed decision about this.  I want to educate myself about it but I'm not sure where to start.

Hi Albermarle, Many thanks for your reply.  Please see my replies in bold and italic.  (It's a shame I can't choose a different text colour!)

Active v. passive won't have made a big different over just a few years; but knowing the proportions in bond funds and share funds might help a lot. Also, when the advisor talked to you, did you say you were cautious, adventurous, etc.?  This might help us say whether the advisor balance between bonds and shares looked reasonable in 2018, and also whether the performance since is in the range of what might have happened (bonds would generally be seen as cautious in 2018, but the worldwide hike in interest rates over the last couple of years has hit them badly - so a lot of people who thought they were playing it safe have lost some money).

Albermarle

AlanP_2 said:

Albermarle said:

Silver66 said:

Hello,

I'm 41 and self employed.  Five years ago I started both a personal pension and a stocks and shares ISA through a financial planning company that was recommended to me by a friend.

Granted that the last five years have been rocky for many investors, but I'm worried about the performance of my pension and ISA.  When I checked last week, both were down 2% since inception in 2018.  I had paid a huge amount in charges:  the charges had eaten up all of the HMRC tax relief that I had received on my pension, and eaten into my savings on top of that.  This does not sound right. Are you saying that the all the 25% tax relief you get has disappeared in charges? How can that have happened when the charges are 1.8% ?

I am thinking of switching my pension and ISA to somewhere else, and I'm doing some research to see if the charges I'm paying are typical.

When I started my pension and ISA, I paid 3% initial advisor charge on most of the money that I paid in. Normally you pay 2 or 3 % of the funds you already have. I suppose if you had no funds to begin with, then charging on contributions was another way of paying. Recently this has decreased to 2%.  When I told my advisor I was thinking of moving, he said he would waive the paying in charge altogether if I stayed. Good

My ongoing charges have been around 1.81%.  This includes 0.75% ongoing advisor charge + 0.31% platform charge + 0.75% typical ongoing funds charge.  Some of my investments are in actively managed funds, and others in passively managed funds.  My advisor says that he can reduce the overall figure to around 1.25% if I agree to moving my investments into more passively managed funds.  The 0.75% ongoing advisor charge includes free financial advice whenever I need it, which has been really helpful. These charges are not abnormal, but obviously 1.25% is better than 1.8%

I just wanted to know if these charges are typical.  Does anyone know where I can find this out?  I spoke to someone on the MoneyHelper website and they said that they can't advise me because they have to be impartial.  I imagine I'll need to pay for advice but I don't know which advisor to approach.  If anyone could help I'd be grateful.

Granted that the last five years have been rocky for many investors, but I'm worried about the performance of my pension and ISA.  When I checked last week, both were down 2% since inception in 2018
For me the apparent poor performance is more of a concern than the charges. The last couple of years have been a bit flat/down, but I would have expected to see some growth since 1998, despite the high fees.
What are you actually invested in?

Substituting 1998 for 2018  and accepting that exact comparisons are difficult and unlikely to be absolutely accurate but as an indicator of last 5 years I am running at 4% annualised for 5 years to end October.

Don't have an IFA but cannot see that 1.8% a year charges on top of 3% upfront can cause an overall loss over 5 years unless OP was very unlucky on timings of contributions.

Couple of points to note:

If contributions are regular e.g. monthly / quarterly / annual then a significant proportion of the total pot has been invested for a lot less than 5 years.

If investments are bond heavy then they have been hammered the last 18 months or so.

1998 must have been a 'Senior Moment' 

Other comparisons over 5 years could be a medium risk low cost multi asset fund. 4.5/5% pa , with OP's high charges to pay looks like it is also around 4%.
A medium/low risk similar fund but with more bonds around 2.5% pa minus some of the high fees again.
So I suppose a 2 % loss in 5 years is possible if the investments were more at the lower risk end of the spectrum. 

Silver66

AlanP_2 said:   Couple of points to note:

If contributions are regular e.g. monthly / quarterly / annual then a significant proportion of the total pot has been invested for a lot less than 5 years.

If investments are bond heavy then they have been hammered the last 18 months or so.

Thanks for your reply, Alan.  Yes, that's right, I've made contributions gradually, so a significant proportion of the pension and the ISA has been invested a lot less than 5 years.

Silver66

dunstonh said:

When I started my pension and ISA, I paid 3% initial advisor charge on most of the money that I paid in.  Recently this has decreased to 2%.  When I told my advisor I was thinking of moving, he said he would waive the paying in charge altogether if I stayed.

Initial charges are only allowed on single contributions or regulars in the first 12 months for new business arranged from 2013 onwards.   You cannot be charged initial fees for regular payments made after 12 months.
Hi DunstonH, Thanks for your reply.  What's the name of this law or regulation?

My ongoing charges have been around 1.81%.  This includes 0.75% ongoing advisor charge + 0.31% platform charge + 0.75% typical ongoing funds charge.  

That is in the ballpark but could be improved on.

Some of my investments are in actively managed funds, and others in passively managed funds.  

Are you sure?    Hybrid portfolios are very commonplace but the Fund OCF tends to be around 0.2x% to 0.4x%.   you say 0.75%.   However, fully active portfolios tend to be around 0.75%.

Are you including the transaction charges figure in that 0.75%?  If so, disregard that column as its not a real charge but a synthetic one. 
I'm sorry, I don't know if the figure includes transaction charges or not.

My advisor says that he can reduce the overall figure to around 1.25% if I agree to moving my investments into more passively managed funds.  The 0.75% ongoing advisor charge includes free financial advice whenever I need it, which has been really helpful.

Correction.  The 0.75% ongoing fee is for ongoing financial advice.   (its not free if its costing you).  Most advisers providing ongoing servicing will do top ups with no initial charges.
Please could you tell me a bit more about how this top-up system works?  Do you mean that they charge per hour for financial advice?  I asked my adviser if this would be an option, instead of the 0.75% overall charge, but he said that it would cost me a lot more if I paid him per hour, because he does a lot of work behind the scenes monitoring my investments and so on.

 I spoke to someone on the MoneyHelper website and they said that they can't advise me because they have to be impartial.

That is not correct.   They should have aid that they cannot advise you because they are neither qualified nor regulated to give advice—nothing to do with being impartial.
I think this is what they did say, actually - I must have remembered incorrectly.  Sorry.

 I imagine I'll need to pay for advice but I don't know which advisor to approach.  

You are already paying for advice.   However, there are two types of adviser.  IFAs and FAs.   IFAs are whole of market and independent.   FAs are restricted in what they can offer from the marketplace.   All salesforces are FAs.     So, you should make sure your adviser is an IFA.
Yes, he is an IFA.

I was thinking that if my advisor is offering to waive the paying in charge, I could move some of my money elsewhere and then move it back there without a penalty if it performs worse.

There shouldn't be any paying in charge if it was set up after 2012.  It's rare for investment platforms to charge any initial charges.   Only the adviser.   So, how are you making your contributions? (regular direct debit or ad-hoc)?
I've been paying on an ad-hoc basis:  for example, I've been transferring old cash ISAs into my stocks and shares ISA when they mature.  I make my pension contribution at some point during the tax year but it's not by direct debit.

You say you started in 2018. So, there should be no initial charges currently on any regular contributions you are paying.  That would be a breach of regulations.
Please can you tell me what this regulation is called, so that I can quote it when I email my adviser?

However, you are not in a position to make that decision in an informed way.  For example, 2022 was a negative year for nearly all investments.  2023 continues to be negative for most fixed interest securities.   Gilts have had thier worst period in over 100 years.    The losses are down to the investments, not the adviser.  

The greater the quantity of fixed interest securities in your portfolio, the greater the loss.     The other major loss area was tech stocks.  Great from 2018 to 2021 but had a very large crash in 2021/22 (dot.com mk2).  Typically around 40%.  So, again, if you are heavier in tech stocks, then your losses would be heavier in that period.