Double charges - is this standard?

SaraD

Hi there,

I have 3 separate pension pots and want to consolidate them into only one, so I can release the 25% tax-free cash from my (very small) combined pension fund. As I have too much else going on to learn everything, I asked the IFA-approved company who provide pension advice for all employees in my work company for some help.

They have provided a quote, using Aviva as the pension provider.  There is a one-off fee for arranging the consolidation & cash release (expected) and a charge from Aviva for administering the plan (also expected). What puzzles me is that they also want to charge an ongoing monthly 'adviser' fee.

It seems that I can either do it all myself and deal directly with Aviva (or whoever I choose) OR ask this IFA company to do it, but be tied in to them ad infinitum, whilst paying 2 separate monthly fees for the same service - at least that's how it looks to me. The first option fills me with dread.

I've asked them to clarify why this is, and they say that Aviva would consider them to be my 'adviser' if they co-ordinate the consolidation and cash release. It doesn't make sense to me, for example, I used a mortgage advisor once, but after paying his fee to arrange my mortgage, I didn't subsequently have to communicate with my mortgage provider through him and continue to pay him!

Is there any way around this, or is it an industry norm?

Thanks for any feedback.

MallyGirl

If they are merging your pensions into an Aviva product only available to advisors then you would have to pay something. If you opened a SIPP you could do the transfer free of charge but you would need to make your own decisions on what to invest the 75% remainder in

eskbanker

SaraD said:

There is a one-off fee for arranging the consolidation & cash release (expected) and a charge from Aviva for administering the plan (also expected). What puzzles me is that they also want to charge an ongoing monthly 'adviser' fee.

That's not 'double charges', that's three separate charges for three separate activities - pension administration isn't the same thing as ongoing advice!

If you don't want ongoing IFA advice then you can either ask them to conduct the transfer on a one-off transactional basis or if they feel unable to do that then vote with your feet and find an adviser who will (which may entail a different pension company).

dunstonh

They have provided a quote, using Aviva as the pension provider.  There is a one-off fee for arranging the consolidation & cash release (expected) and a charge from Aviva for administering the plan (also expected). What puzzles me is that they also want to charge an ongoing monthly 'adviser' fee.

Ongoing adviser fees are optional.     For some people, there are ongoing needs and its a cost effective way for paying for ongoing advice.  For others, there are no ongoing needs and no point paying for ongoing advice.

It seems that I can either do it all myself and deal directly with Aviva (or whoever I choose) OR ask this IFA company to do it, but be tied in to them ad infinitum, whilst paying 2 separate monthly fees for the same service - at least that's how it looks to me. The first option fills me with dread.

Yes you can DIY.  However, if you can DIY, then why are you paying an IFA to do it for you?
If you ask the IFA company to do it, then they will charge you for each piece of work at the full rate each time you ask them to do some work.         That will often cost more than having the ongoing servicing in place.   

You are not paying two separate fees for the same service.   Aviva provide the wrapper and administration but will not provide any ongoing advice and will not recommend any funds (or changes to funds etc).        The adviser is responsible for ongoing advice and any investment selections.

Prior to 2013, these charges would be bundled as a single charge.   However, post 2013, the charges were unbundled so you could see which part of the chain was earning what and give you the chance to go DIY if you wanted.

I've asked them to clarify why this is, and they say that Aviva would consider them to be my 'adviser' if they co-ordinate the consolidation and cash release. It doesn't make sense to me, for example, I used a mortgage advisor once, but after paying his fee to arrange my mortgage, I didn't subsequently have to communicate with my mortgage provider through him and continue to pay him!

Mortgage advice is transactional.  Financial planning and ongoing facilitation is ongoing.

Is there any way around this, or is it an industry norm?

It is your choice.  Not the advice firm.   If you don't want an adviser and prefer to DIY then tell the advice firm you do not want ongoing servicing.   However, it is best to tell them up front as advisers will normally change the investment selection for someone that isn't going to use ongoing services and may change to a different provider.  Aviva Platform (rather than Aviva Life & pensions), for example, do not cater for DIY apart from a small number of transactions.  They require the adviser to key things in.    

Bostonerimus1

SaraD said:

Hi there,

I have 3 separate pension pots and want to consolidate them into only one, so I can release the 25% tax-free cash from my (very small) combined pension fund. As I have too much else going on to learn everything, I asked the IFA-approved company who provide pension advice for all employees in my work company for some help.

They have provided a quote, using Aviva as the pension provider.  There is a one-off fee for arranging the consolidation & cash release (expected) and a charge from Aviva for administering the plan (also expected). What puzzles me is that they also want to charge an ongoing monthly 'adviser' fee.

It seems that I can either do it all myself and deal directly with Aviva (or whoever I choose) OR ask this IFA company to do it, but be tied in to them ad infinitum, whilst paying 2 separate monthly fees for the same service - at least that's how it looks to me. The first option fills me with dread.

I've asked them to clarify why this is, and they say that Aviva would consider them to be my 'adviser' if they co-ordinate the consolidation and cash release. It doesn't make sense to me, for example, I used a mortgage advisor once, but after paying his fee to arrange my mortgage, I didn't subsequently have to communicate with my mortgage provider through him and continue to pay him!

Is there any way around this, or is it an industry norm?

Thanks for any feedback.

It's good that you are asking questions; many people don't and end up paying fees that they might have avoided and with pension outcomes that they were not expecting. There are fees you can't avoid and those will be charged by the funds you buy and the platform/pension administrator you use to buy the funds, but you can look to minimize those fees as some funds are far more expensive than others. So do research on the funds you have available. An advisor and ongoing advice is optional, unless you are locked into some scheme that requires one.

Be a little cynical and expect the industry to "pick your pocket" if you are not looking. Many people simply don't understand how much they are paying in fees and the long term impact that can have on their pension pot. So do research, ask questions and don't sign up for something without understand it. You've made a good start.

Pat38493

SaraD said:

Hi there,

I have 3 separate pension pots and want to consolidate them into only one, so I can release the 25% tax-free cash from my (very small) combined pension fund. As I have too much else going on to learn everything, I asked the IFA-approved company who provide pension advice for all employees in my work company for some help.

They have provided a quote, using Aviva as the pension provider.  There is a one-off fee for arranging the consolidation & cash release (expected) and a charge from Aviva for administering the plan (also expected). What puzzles me is that they also want to charge an ongoing monthly 'adviser' fee.

It seems that I can either do it all myself and deal directly with Aviva (or whoever I choose) OR ask this IFA company to do it, but be tied in to them ad infinitum, whilst paying 2 separate monthly fees for the same service - at least that's how it looks to me. The first option fills me with dread.

I've asked them to clarify why this is, and they say that Aviva would consider them to be my 'adviser' if they co-ordinate the consolidation and cash release. It doesn't make sense to me, for example, I used a mortgage advisor once, but after paying his fee to arrange my mortgage, I didn't subsequently have to communicate with my mortgage provider through him and continue to pay him!

Is there any way around this, or is it an industry norm?

Thanks for any feedback.

To add to the other comments - you may not even need to merge the pensions together to take out the tax free cash.  Depending on which pensions and providers we are talking about, you might just be able to take the 25% out of each pot (possibly for free depending again on the provider and pension).

Also it's not clear what you mean by "IFA approved company who provide advice to all employees in the company".

If you research it and figure out how to do it, you might be able to do all that for nothing, or at least a lot less than what they are quoting you.

markNEscotland

SaraD, a very interesting dilemma, and one I can relate to; some very good advice above.
I too am looking at advice and pension/investment charges on my SIPP pot (Standard Life), and whether it is worth continuing with. My pot of £200K incurred charges of £2732 for the last year (1.29%).

Being a pensioner, I am looking to start drawing shortly; we have discounted the annuity route, and now opting for drawdown. Unfortunately we used my 25% tax free some years ago.
As explained above, we have choices to dump some of the charges, but  I am considering retaining my adviser, even though the recent annual return has largely been consumed by charges!
Definitely be cynical regarding 'advice', and ensure you watch your tax thresholds.

Albermarle

@markNEscotland
Lots of threads on the forum about 'whether to keep my IFA or not?' 
For example
Do I Still need a Financial Advisor — MoneySavingExpert Forum

@SaraD

I think you might be missing one point. Once the pension is set up and the 25% tax free cash taken, then 75% remains in the pension. If you do not pay for ongoing advice then you will have to decide how to manage it, and any future taxable withdrawals.
The advisor will have set up the pension and the investments in it, so probably nothing needs doing for a while, but eventually it will. When you want to withdraw money you will have to contact Aviva and arrange this.
It is not particularly difficult, but it seems from what you say these things are not your cup of tea.

xylophone

Had you considered opening an Aviva SIPP for yourself and then requesting the transfer in of your pensions?

https://www.aviva.co.uk/retirement/aviva-pension/

You could choose one of their ready made options for the 75% ? 

gm0

You have run into the wall of obfuscation and complexity.

1) You can consolidate for free.  Form filling and admin and the jargon is formidable if like most unfamiliar.  It's not a long process but it is offputting.  Choosing a retail platform and a simple one stop shop portfolio choice.

2) An IFA may take you to adviser introduced stuff - as here - with an initial and ongoing fee (for them to do it) and watch over it annually. And a product fee (made up of a platform bit and funds bit). 

It's not "how it has to work".  It's just "what they do"

3) Another pension transfer consolidator farm business might do a fixed price recommend and transfer service for you (and do the regulated advice deliverables because they have to).  Without the expectation of ongoing advice servicing.  They might well take you to a life company or someone like an Aegon for the product bit. 
Again to something simple - a one stop portfolio at a "risk" level that comes out of the discussion and financial discovery done with you.

With the first and last of these you end up with a product - and it costs what it costs. 

And with the transfer farm - you get the admin done for you.  With the adviser and the transfer farm - you need to be happy giving letters of authority for them to contact your schemes and get information. And then when you agree the "new" solution.  It all gets pulled across.  But the discovery process asks quite a lot of questions.  Unsurprisingly mostly the same ones you need to think about if doing it yourself.

With the middle IFA one. You now have a financial adviser in tow.  At ~0.5% per year on top of product fees.  Which you need and want.  Or you don't. 

Over 40 years on simple assumptions about living off your pension and depleting it.
It's roughly 10% of the initial pot value in charges.  Plus the initial transfer charge. 
You need or want that advice enough to justify that. Or you don't.

SaraD

Thank you all so far. Many of your responses undoubtedly contain some useful information, but much of it is beyond me (or rather, I have not the time to properly assimilate/research it). For clarity, the IFA company is simply the same pension advisor my work organisation partners with to provide company pension advice....I approached them based only on the fact that I already knew them. So far, they seem to be saying I can either take their option (a one-off consolidation fee plus monthly ongoing advice charge) or do it myself. They seem to be saying they won't offer me the option of refusing the monthly charge. 

I'm awaiting 100% clarification on this, but wanted to prepare myself by asking the question here.

I shall review all responses - thanks again.