What pension + advice fees are reasonable

cfw1994

m_c_s said:

A !% annual fee on an initial investment of £200k that grew 8%pa over 20 yrs would be £160k. A question you should ask yourself first is are you happy to give your adviser £160k out of your retirement pot? Ofcourse if you are adding to your pot each year then the fee given to your adviser over 20 yrs will also grow enormously, Adding 20k per annum to your pot would mean a total fee paid of around £300k. 
What is he or she doing for you for this £160k or £300k?

How did you get those numbers?
What number did you intend to put with that exclamation mark?

1% on £200k is £2k.  
At 8% growth, that 2k would be worth under 10k (source: have a tinker here).
2% would be under 20k.

What am I missing?

m_c_s

Initial £200k growing at 8% pa for 20 years = £932k
Initial £200k growing at 7% pa for 20 years = £773k

1% pa adviser fee takes £160k out of the pension pot.

Fees no matter how small have a large impact on the end result especially when compounded over many years. 

dunstonh

You wouldnt expect to pay 1% at £773k let alone £932k.  That is just greedy by any firms doing that.

Albermarle

Part of the reason for the poor historic performance of the funds that workplace pension invested in was maybe a 70/30 split of equities to bonds

To maybe put things into context.

Only a minority of investors/pension contributors are comfortable with the potential high volatility of 100% equity funds.

The large majority of workplace pensions go into a default fund, as only a small % picks their own investments in the pension.

So the default fund is inevitably a middle of the road mix of equities and bonds. So long term growth is compromised, but it reduces the number of panic stricken/angry calls to the pension provider when people funds drop 40% in a crash. 

m_c_s

dunstonh said:

You wouldnt expect to pay 1% at £773k let alone £932k.  That is just greedy by any firms doing that.

The Financial Conduct Authority (FCA) says advisers charge an average 0.8% a year for ongoing advice.

Even taking 0.5% pa fee, which is often quoted, over 20 years that is £80k+ taken off the pension pot. 

Anyone using an IFA or FA needs to understand the compound nature of ongoing fees quoted as small percentages. These will add up to enormous amounts over many years. They should understand fully what are they getting for those large sums of money (not just a small percentage).

dunstonh

The Financial Conduct Authority (FCA) says advisers charge an average 0.8% a year for ongoing advice.

As information goes, that is completely useless without context.     There are far more people with £100k than £1m.  You expect 1% on £100k.  The most dominant charge is 0.50%,

Even taking 0.5% pa fee, which is often quoted, over 20 years that is £80k+ taken off the pension pot. 

Such is life.  If the supermarket didn't have a margin and the money I saved was invested, I would probably have over a million pounds more over my life.

Anyone using an IFA or FA needs to understand the compound nature of ongoing fees quoted as small percentages. These will add up to enormous amounts over many years.

And they also need to know that going DIY doesn't mean it will be cheaper or better.   Knowing what you are doing is key.    Some of HL's biggest selling funds are their own multi-manager funds.  That results in almost double the total charges of what an IFA solution can do.    So, very many DIYers who think they are doing well by cutting out the adviser are actually paying a lot more than using an adviser.

Albermarle

m_c_s said:

dunstonh said:

You wouldnt expect to pay 1% at £773k let alone £932k.  That is just greedy by any firms doing that.

The Financial Conduct Authority (FCA) says advisers charge an average 0.8% a year for ongoing advice.

Even taking 0.5% pa fee, which is often quoted, over 20 years that is £80k+ taken off the pension pot. 

Anyone using an IFA or FA needs to understand the compound nature of ongoing fees quoted as small percentages. These will add up to enormous amounts over many years. They should understand fully what are they getting for those large sums of money (not just a small percentage).

On the other side, someone could make a big mess of it all and lose a lot more than £80K
We have had posters on here who have not claimed their higher rate tax relief for 20 years, or have been invested 100% in gilts when they want to go into drawdown. etc etc
So you can just as easily lose £80K and more due to lack of knowledge.
Horses for Courses....

m_c_s

Albermarle said:

m_c_s said:

dunstonh said:

You wouldnt expect to pay 1% at £773k let alone £932k.  That is just greedy by any firms doing that.

The Financial Conduct Authority (FCA) says advisers charge an average 0.8% a year for ongoing advice.

Even taking 0.5% pa fee, which is often quoted, over 20 years that is £80k+ taken off the pension pot. 

Anyone using an IFA or FA needs to understand the compound nature of ongoing fees quoted as small percentages. These will add up to enormous amounts over many years. They should understand fully what are they getting for those large sums of money (not just a small percentage).

On the other side, someone could make a big mess of it all and lose a lot more than £80K
We have had posters on here who have not claimed their higher rate tax relief for 20 years, or have been invested 100% in gilts when they want to go into drawdown. etc etc
So you can just as easily lose £80K and more due to lack of knowledge.
Horses for Courses....

And where did I say not use an advisor for tax advice or as a one off activity as sounding board for future planning purpose? 

m_c_s

Such is life. Just give me that ongoing fee. Don't concern yourself.