Actively Managed Pension Charges.

Bod_1234

Had a workplace pension all my life, however I'm now working for myself, and those pension pots aren't suitable, so need a new pension to pay into for the next 6 years or so, until I plan to retire.  I am looking at pouring quite a large % of my earnings into this.

Been speaking to a local pension provider, however I'm not that good on financial jargon, and I have some questions around charges on the pension.   My workplace pension had a 0.3% management charge, and that was all, I get that it was a "no-frills" pension, however the the bulk of what was being paid in was being invested, and it's been historically performing broadly in line with what my new provider is advising.

Whilst I appreciate should be asking him for a better explanation of the charges, and I'm sure I will get one (whilst looking really thick in the process), I'm hoping, without revealing too much about the details of the provider, a finger in the air, go/no-go as to if the charges seem about right for an actively managed pension account.

It's my understanding, I am paying 1.5% a year management charge (so 5x what I was paying previously), and as long as I leave it in there 6 years without drawing on it. (the 3.38% 2.62%  / 6% is all about early drawdown before year 6).

You might sense, I have general mistrust of anyone in the financial services industry (Bankers bonuses anyone???)...    I'm sure there are good eggs out there, however they all have a friendly smile when they want you to sign on the the dotted line.

Without going into specifics of performance and how much management it comes with, does what I'm being sold seem in line with the rest of the industry for this type of product?

Thanks

Marcon

Bod_1234 said:

Had a workplace pension all my life, however I'm now working for myself, and those pension pots aren't suitable, so need a new pension to pay into for the next 6 years or so, until I plan to retire.

First things first...why are those pots 'not suitable'? It sounds as if you have pots with more than one provider, and assuming that at least some of them are personal pensions (as opposed to trust-based occupational schemes, where you wouldn't normally be eligible to go on contributing once you've left employment with the sponsoring employer), they might have (a) preferential charging structures and (b) a good choice of funds which might with a bit of tweaking fit the bill now.

You say your workplace pension had an AMC of 0.3%, so what's wrong with going on paying into that, if you are able to do so? Do they offer more investment choices than you currently utilise, and if so, what impact would a fund switch have on overall charges?

But if not...why on earth make life so complicated for yourself? Set up your own pension arrangement (be it a stakeholder, personal pension or SIPP) - plenty of providers will deal direct with customers, and details of their charges are on their website(s). 

QrizB

Bod_1234 said:

Been speaking to a local pension provider ...

That's not "a local pension provider", it's some sort of financial adviser. They're charging you 3.38% upfront on all your contributions for five years, which (to my mind) is outrageous.

Bod_1234 said:

... a finger in the air, go/no-go as to if the charges seem about right for an actively managed pension account.

I'd suggest it's a no-go.

Why specifically do you want an actively-managed pension?

There are lots of cheap DIY pensions, and almost all of them have no upfront charges. Here's a partial list:

https://moneytothemasses.com/saving-for-your-future/pensions/the-best-cheapest-sipps-low-cost-diy-pensions

dunstonh

That's not "a local pension provider", it's some sort of financial adviser. They're charging you 3.38% upfront on all your contributions for five years, which (to my mind) is outrageous.

That isn't allowed.   Charges like that were banned from 2013.    Advice charges for regular contributions can only be collected for a maximum of 12 months.

The charges look like St James Place.    

sandsy

The company you're considering looks like St James Place. If you search for SJP on this board, you'll find many references to them being one of the most expensive providers for pensions and advice in the market.

jamesd

As the others suggested, the price is high and very unlikely to be worthwhile. I also thought SJP from their magnitude.

How are you invested now? What changes interest you and why?

Qyburn

QrizB said:

Bod_1234 said:

Been speaking to a local pension provider ...

That's not "a local pension provider", it's some sort of financial adviser. They're charging you 3.38% upfront on all your contributions for five years, which (to my mind) is outrageous.

It's 6.00%. 3.38% "Advice Charge" plus 2.62% "Product Charge". Charged on everything you put in for the first five years.

Bod_1234

Marcon said:

Bod_1234 said:

Had a workplace pension all my life, however I'm now working for myself, and those pension pots aren't suitable, so need a new pension to pay into for the next 6 years or so, until I plan to retire.

First things first...why are those pots 'not suitable'? It sounds as if you have pots with more than one provider, 

2 workplace pensions with one provider.  They aren't suitable as I'm working for myself as a limited company and I want to take the tax breaks at a "net pay" arrangement rather than uplift on the contributions. The provider confirmed this is not possible on the 2 workplace pensions I have, as they are linked to the companies I worked for,  not my company.

Thanks for the all the advise so far, I'm considering contacting my new provider and canceling under cooling off period (I haven't paid anything in yet)

dealyboy

Bod_1234 said:

Marcon said:

Bod_1234 said:

Had a workplace pension all my life, however I'm now working for myself, and those pension pots aren't suitable, so need a new pension to pay into for the next 6 years or so, until I plan to retire.

First things first...why are those pots 'not suitable'? It sounds as if you have pots with more than one provider, 

2 workplace pensions with one provider.  They aren't suitable as I'm working for myself as a limited company and I want to take the tax breaks at source rather than uplift on the contributions. The provider confirmed this is not possible on the 2 workplace pensions I have, as they are linked to the companies I worked for,  not my company.

Thanks for the all the advise so far, I'm considering contacting my new provider and canceling under cooling off period (I haven't paid anything in yet)

Good thinking.

Albermarle

The workplace pension charge of 0.3% all in, is on the low side. It is possible to get that low with a pension you set up yourself, but more typically you will be looking at 0.4% to 1.5% . The higher figure being with a more expensive provider with actively managed funds. A middle of the road cost would be around 0.6%.

If you went to an IFA, there would also be an initial charge, and normally an ongoing charge . Plus of course costs for the pension platform and investment funds. So it would be more expensive than doing it yourself, but significantly less than you have been quoted, and with no tie ins for the next few years.

Bod_1234

QrizB said:

Why specifically do you want an actively-managed pension?

There are lots of cheap DIY pensions, and almost all of them have no upfront charges. Here's a partial list:

https://moneytothemasses.com/saving-for-your-future/pensions/the-best-cheapest-sipps-low-cost-diy-pensions

Yeh, that's not going well.  After spending 30 minutes setting up a Nutmeg account, it turns out it's not suitable for net pay pensions, so now I have to go through the nonsense of getting my details removed from their systems and accounts deleted...  Grrr...

Any providers on that list suitable?