Are my pension charges too high ?

aalleexx

I'm PAYE and have a financial advisor who set up my original pension 23 years ago. I've recently looked at my pension statement and want your thoughts on whether I'm overpaying with regard to charges. I see in the statement that there is an ongoing 0.5% charge for my financial advisor along with various other fees/charges.

My other half has suggested that as the advisor has already picked out the pension fund, which Prudential manages, there is no need to pay her an ongoing 0.5%. She says a one-off set up or finders fee was okay, but ongoing annual charges in perpetuity are not necessary as the work has been done.

Anyway, I would be very grateful if you could look at the attached images and give your thoughts as to whether the charges are excessive in relation to what I'm paying in (£300 per month).
Thank you.

 

IvanOpinion

Only you can judge if you believe your advisor is offering value for money for their £400-ish for the last 23 years (it is a significant chunk of money). Have you asked or been offered any additional advice during the year? I believe that it is the going rate for an advisor.

My personal opinion is that you do not need to be paying 0.5% every year, better in your pocket than someone else's.  Others may consider it good value for money.

In the future you may well have some significant life events at which point an advisor could be invaluable, you can probably engage one on a fixed fee basis.

Albermarle

Firstly an ongoing charge of 0.5% is at the low end, it looks from your figures that your fund is about £100K, in which case 1% would be more normal.

Secondly an advisor is not just there to start a pension, or pick investments. They can advise on tax, inheritance, retirement strategies etc . If you are not using them or getting any useful regular advice, then it does beg the question as to the value.
Worth noting that taking a pension efficiently is a bit more complicated than building one up, but still not rocket science.

aalleexx

Hi both Thank you for your comments, I think I will look to see if I can remove the advisors fees to start with.

Novice_investor101

An ongoing advice charge should only really be charged if you’re having regular reviews with your advisor. Regular can mean once a year to chat about your finances. If you’ve not seen the advisor for years then raise a question (complaint) with them as to why they’ve been receiving the fee when you’ve not received any ongoing advice from them. 

I see this a lot with pensions & investments sold by an advisor then they’ve not seen the client for years. The new Consumer Duty rules don’t look kindly on it. 

Just be mindful, too, that you’re making a very common assumption which is incorrect. Your pension provider doesn’t manage your pension or fund, they only do the administration of it. Meaning they collect your direct debit, invest it where you’ve told them to, do the HMRC bits, keep to the pension regulations, pay out income to people when they ask for it etc.

Your advisor manages your investments by deciding which are suitable for you at certain milestones in your life. If you remove your advisor & don’t actively be attentive to what your investment funds are & how they’re performing/whether they’re right for you then no one is actually managing your pension. 

dunstonh

My other half has suggested that as the advisor has already picked out the pension fund, which Prudential manages, there is no need to pay her an ongoing 0.5%. She says a one-off set up or finders fee was okay, but ongoing annual charges in perpetuity are not necessary as the work has been done.

Normally, when you employ an adviser on an ongoing basis, you don't pay initial charges any more. i.e. no set up fee because the ongoing servicing is to ensure ongoing suitability.

Hi both Thank you for your comments, I think I will look to see if I can remove the advisors fees to start with.

You can.  You just tell your financial adviser that you no longer wish them to act on your behalf and for the ongoing remuneration to be turned off. 

Be aware, that any ongoing modeling, reporting, tracking and warnings will cease.  (assuming your adviser has those). And if you use them again in the future, you will pay for any transactions explicitly.

An ongoing advice charge should only really be charged if you’re having regular reviews with your advisor. Regular can mean once a year to chat about your finances. If you’ve not seen the advisor for years then raise a question (complaint) with them as to why they’ve been receiving the fee when you’ve not received any ongoing advice from them. 

On a pension arranged after 1st Jan 2013 and from 2018 onwards, it is "at least annually".

The series E pru funds are post 1/1/13.

Albermarle

Novice_investor101 said:

An ongoing advice charge should only really be charged if you’re having regular reviews with your advisor. Regular can mean once a year to chat about your finances. If you’ve not seen the advisor for years then raise a question (complaint) with them as to why they’ve been receiving the fee when you’ve not received any ongoing advice from them. 

I see this a lot with pensions & investments sold by an advisor then they’ve not seen the client for years. The new Consumer Duty rules don’t look kindly on it. 

Just be mindful, too, that you’re making a very common assumption which is incorrect. Your pension provider doesn’t manage your pension or fund, they only do the administration of it. Meaning they collect your direct debit, invest it where you’ve told them to, do the HMRC bits, keep to the pension regulations, pay out income to people when they ask for it etc.

Your advisor manages your investments by deciding which are suitable for you at certain milestones in your life. If you remove your advisor & don’t actively be attentive to what your investment funds are & how they’re performing/whether they’re right for you then no one is actually managing your pension. 

Regarding you final comments, they are very true.
Many posters, and I think we can assume many others with  a DC pension, seem to think that the pension provider is managing their investments for them .
You can understand it to some extent as many providers offer lifestyle plans, default funds, multi asset funds etc
that do offer a level of management, as compared to buying your own shares and bonds etc and this probably confuses the issue in peoples minds . Especially as so many do not understand the split between pension provider and the investments.

aalleexx

Hi all, thank you for the further comments on this subject, you have provided useful advise . Its has been good to find out that the pension providers don't actually manage the investments, not that is specifically a bad thing but its useful to get more of an idea about what we are actually paying them for. I will call my provider to discuss the yearly fees, I`m not opposed to paying them but I want to be sure what I am paying them reflects what they are doing for me.

 

Albermarle

To quote from @Novice_investor101

Your pension provider doesn’t manage your pension or fund, they only do the administration of it. Meaning they collect your direct debit, invest it where you’ve told them to, do the HMRC bits, keep to the pension regulations, pay out income to people when they ask for it etc.

However it can be confusing with pension providers like Royal London, as they also have their own funds.

So part of what you are paying is for the admin of the pension and part is for the investment fund your money is in.

RL tend to be quite low priced with an overall price for everything around 0.5% although your arrangement might be different. In any case I thought your main worry was the 0.5% paid to your financial advisor, as opposed to the actual pension charges?

dunstonh

aalleexx said:

Hi all, thank you for the further comments on this subject, you have provided useful advise . Its has been good to find out that the pension providers don't actually manage the investments, not that is specifically a bad thing but its useful to get more of an idea about what we are actually paying them for. I will call my provider to discuss the yearly fees, I`m not opposed to paying them but I want to be sure what I am paying them reflects what they are doing for me.

 

Your pension provider is just an administrator for your pension.    They have their price but they don't have to justify it to you.  That is their price and you can take it or leave it.   Providers do exactly what they are meant to do and they all do the same thing fundamentally.   Some may have better software or better options but functionality but there is little point phoning a call centre member of staff asking them if what you are paying reflects what they are doing as they cannot answer that.

it is for you to decide if their charges are acceptable to you and for you to move to a different provider if you feel they are not.