Inherited SIPP options

Cardew

https://forums.moneysavingexpert.com/discussion/comment/82092593#Comment_82092593

I have followed your excellent and measured input on this forum over a number of years and obviously you are correct on the distinction between and IFA and FA. As you say it is not a distinction appreciated by ‘Joe Public’.

The lady who died had a inflation linked gold plated pension with a major company. She was diagnosed with a terminal illness 6 years ago and cashing in that pension would have produced under £90k. As a result of advice, indirectly from this forum she got a transfer value of over £250k and placed this in a SIPP. Apparently there were regulations restricting the choice of company and a family friend(her father’s solicitor) gave her a contact. It transpired that this contact worked for a company. Her ‘low risk’ SIPP is roughly the same value as it was when invested. In addition to the companies standard charges, and a £5K setting up fee, the FA was paid £1,000 a year commission by the company for 3 years, until it was queried; the justification being that he was available to give advice if she wanted to change the composition of the SIPP.

Incidentally I am a big fan of Which. I have just been looking at their ‘Best Drawdown pension providers’ article. It appears that you can now discuss and set up an pension through Which. Interestingly, and seemingly conflicting with your statement that ‘Commission hasn’t existed since 32/12/2012’, should you use the services of Which, the article states ‘Which earns a commission to fund its not-for-profit mission if you buy a product via this service’

So how should Which be classified? As an IFA or FA?

Anyway the IFA/FA issue has sidetracked this thread.

dunstonh

Incidentally I am a big fan of Which. I have just been looking at their ‘Best Drawdown pension providers’ article. It appears that you can now discuss and set up an pension through Which. Interestingly, and seemingly conflicting with your statement that ‘Commission hasn’t existed since 32/12/2012’, should you use the services of Which, the article states ‘Which earns a commission to fund its not-for-profit mission if you buy a product via this service’

Like many things, there are nuances. Commission was banned for advice. However, non-advised services can still take commission.

I'm generally not a fan of which when it comes to financial products. Same goes for many companies that rank different products. You see some pretty awful products appearing near the top. Some of which you just can't help feeling they're there because of some backhander or commercial reason.

So how should Which be classified? As an IFA or FA?

It's neither. They don't give advice.

Her ‘low risk’ SIPP is roughly the same value as it was when invested.

Gilts and bonds have been a disaster over the last seven years. They are the key investments used on the defensive side of a portfolio. Basically, they went up and then they went down, and they're back to where they were more or less seven years ago. Portfolios heavy in those have tended to suffer low returns. Portfolios very heavy in those have gone nowhere.

Sometimes it's quite risky to be heavy in equities but it can also be quite risky to be heavy in gilts and bonds.

 In addition to the companies standard charges, and a £5K setting up fee, the FA was paid £1,000 a year commission by the company for 3 years, until it was queried; the justification being that he was available to give advice if she wanted to change the composition of the SIPP.

As mentioned, the commission part is not possible. Companies are not allowed to pay the advisor commission for any product set up after 2012. Anything that was paid to the advisor would have been explicitly deducted from the value of the pension as a fee.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82093607#Comment_82093607

It has been noted on the forum more than once that some of the Which articles on personal finance, pensions etc have some significant errors. Also they seem very reluctant to correct them even when forum/which members have contacted them.

ali_bear

Beware of Whiches 🧙