Bundling our pensions and giving the lot to Schroders Personal Wealth - yes or no?

Pensionnewbie1969

My husband has reached 55 and I’m a couple of years behind. We both have a couple of pensions from previous jobs totalling around £550k. 

Our bank (Lloyds), MAGICALLY sensing that 55 was looming, offered us a free chat/consultant meeting with one of their experts at Schroders Personal Wealth.

Having at least heard of Schroders and having no real idea as to what to do next we agreed and had the meet.

And a very nice Schroders chap spelt it all out. The short version being that if we sign the contents of our four pensions over to him, Schroders will charge us a transfer fee and then an annual fee for managing our funds…

And for that fee our cash will be expertly and aggressively managed rather than sit in the quiet, safe, no-one-cares doldrums that they’ve been in for years.

In short we’d be paying a bit… Which looks odd/scary… But earning more than that back by virtue of someone actually working with our money to earn their cut.

Intention is to draw down from this (hopefully swelling) pot from time to time rather than buy an annuity.

We’re mulling over signing on the line, but just wanted to get topline thoughts from folks here on the forum. 

Has anyone done similar? With Schroders or other? Any experiences or comments? Is it worth bundling them up and giving to someone who takes a cut in order to invest ‘properly’?

Or is this all robbery/hogwash and we should leave well alone? Thanks!

Dazed_and_C0nfused

Are they financial advisors or independent financial advisors?

I suspect the former.

Which if so begs the question why would you choose a FA over DIY or an IFA?

dunstonh

Our bank (Lloyds), MAGICALLY sensing that 55 was looming, offered us a free chat/consultant meeting with one of their experts at Schroders Personal Wealth.

This is Lloyds latest attempt at the investment market with all previous versions having being shelved when Lloyds changed direction (which it does often).

its a restricted offering using only Schroder investments.     Often referred to as tied agents or appointed reps (sales reps).

The initial charge as a percentage is 1.75% which is close to the market average.   However, there is no tiering on that charge and its cap is £20,000 (which is massive).  So, it's better value for smaller investors but not as good for larger ones.

They increased their charges in July to charge 1.75% for transfers even if you are on ongoing servicing (previously they didn't charge initial on those if you had been with them for longer than 12 months).

Their ongoing advice charge is 0.65% p.a.     The most dominant ongoing advice charge in the marketplace is 0.50% but smaller values are often tiered to 0.75% to 1.00%.   So, again, it favours small values rather than larger ones.

Lloyds are positioning this service to be cheaper than the wealth management companies like SJP or True Potential going in respect of initial charge going by their literature.  S

 However, its annual costs are more expensive 

Additionally, the investment charges (excluding advice) for them average 1.6% according to their website.  They break it down as:
0.35% for DFM
0.20% for platform
0.62% for OCF
0.43% for transaction charges.
Add on the 0.65% for ongoing adviser charges and you are 2.25% p.a.

here is an IFA pricing for comparison
0.09% for DFM
0.15% for platform
0.09% for OCF
0.03% for Transaction charges
0.50% for ongoing advice.
Total: 0.86% 

At £550k, you would expect an ongoing advice charge of 0.50% p.a. and the initial fee to be around £2500-£5000 if the pensions have no safeguarded benefits. Lloyds would be £9625 on £550k. So, both ongoing and initial fees are higher.      Even SJP, who are considered one of the most expensive distribution channels out there have lower annual charges than this.   However, their initial is more than double Lloyds offering.     

Has anyone done similar? With Schroders or other? Any experiences or comments? Is it worth bundling them up and giving to someone who takes a cut in order to invest ‘properly’?

The general rule of thumb is to either DIY or use an IFA.   Not to use FAs or sales agents of the company they represent.      Restricted advice services are, by definition, restricted.   Restrictions will vary, but the most common is that they are tied to one company.   No single fund house is the best in all areas but if you go with a provider that uses all their own funds, you will need to accept that.     Restrictions can also be in areas where they can give advice.    So, at £550k paying 0.65%, you would be paying offer the odds for an adviser that is restricted when you can get 0.50% for independent without restrictions.

You will find expensive IFAs and low-cost IFAs but the Lloyds offering is very expensive

Linton

It is always recommended here that if you want assistance with managing your investments you should talk to an IFA (Independent Financial Advisor) who will propose an investment management strategy that is demonstrably appropriate to your circumstances and corresponding investments that are chosen from from across the whole market. An IFA is paid by you for the work done and cannot receive commission from choosing specific products.

IFAs are authorised and regulated by the FCA. If at some later date you believe the strategy or chosen investments were not appropriate you can complain to them and if the complaint is upheld you would be compensated.

None of this applies to a Financial Advisor. They are best regarded as salesmen.

michaels

DIY you can potentially end up with exactly the same investments (chosen from a much wider pool) and pay as little as 0.15% per annum with no up front charge.

The difference between 0.15% and 1.6% on £550k is £7,975 a year or £319,000 over a 40 year retirement.

Assuming an SWR of 3.5% then with 0.15% total charges you could withdraw £18,254 pa, with 1.6% that would be £10,450pa

Bostonerimus1

A definite NO from me. If you can DIY your annual costs will be a fraction of the Schrodrer's charges given above (which are outrageous IMO) and maybe half of the far lower IFA costs.

Pensionnewbie1969

This is super interesting and helpful. Thanks esteemed forum members! Being a newbie… I'm assuming DIY is 'do it yourself' - not sure if I'm up to wisely moving investments around various funds etc… And - by the sound of things - my next step should be to get an Independent Financial Advisor on the job (and pay for their time and effort) rather than let a Salesman give me his time for 'free'… Fair assessment? Thanks, folks!

FIREDreamer

Yes or No? - No

(with added rhubarb)

Bostonerimus1

Pensionnewbie1969 said:

This is super interesting and helpful. Thanks esteemed forum members! Being a newbie… I'm assuming DIY is 'do it yourself' - not sure if I'm up to wisely moving investments around various funds etc… And - by the sound of things - my next step should be to get an Independent Financial Advisor on the job (and pay for their time and effort) rather than let a Salesman give me his time for 'free'… Fair assessment? Thanks, folks!

Yes a pretty fair assessment of things. However, investing is not about "moving investments around various funds" - it's about creating a long term portfolio of funds that will meet your financial goals and making regular contributions over your lifetime. Patience and perseverance are important. I've owned basically the same funds for the last 35 years and the only big change in my portfolio happened when I retired.

Investing really isn't that complicated once you cut through all the noise generated to make you think that it is. So take some time to read about investing, pensions, ISAs etc and even if you decide you don't want to DIY you will go into any IFA meetings with the knowledge to understand what they are saying.

Albermarle

In short we’d be paying a bit… Which looks odd/scary… But earning more than that back by virtue of someone actually working with our money to earn their cut.

No legitimate FA or IFA will ever promise/guarantee that they will generate better returns, or any returns. ( if they do it is usually a scam) . 
In any case if you do pay for one, the value is more in that investments are picked that are appropriate for you, your objectives and situation/age. Many people are happy to sacrifice high growth if their investments are not that scarily volatile. Others are happy with a wilder ride.
Also the advisor can make sure everything is done in a tax efficient way and in line with changing legislation. It is not just about the investments themselves. 
Plus of course it takes pressure off the client who may be uninterested or lack confidence in this area. 
However of course it all comes at a cost that can be lower if you DIY. That cost adds up over the years.
As said already DIY means putting in some reading ( this forum is a good resource), but it is not rocket science if you are reasonably numerate and level headed.

zagfles

Pensionnewbie1969 said:

This is super interesting and helpful. Thanks esteemed forum members! Being a newbie… I'm assuming DIY is 'do it yourself' - not sure if I'm up to wisely moving investments around various funds etc… And - by the sound of things - my next step should be to get an Independent Financial Advisor on the job (and pay for their time and effort) rather than let a Salesman give me his time for 'free'… Fair assessment? Thanks, folks!

DIY is IMO (in my opinion) a misleading term that implies you have to actively manage your investments and get involved in share dealing etc. You don't. You can use robo advice, or you can use ready made pensions, target retirement funds etc. 

See Best SIPP: Build a low cost DIY pension - MoneySavingExpert