IFAs Commission on a Pension Transfer (re-pensioning etc)

Retired_I.F.A.

Somebody must have listened to me after all then, for years I critisised the insurance companies with their scaled allocation rates, their bid offer spread, their initial units, accumulation units policy fees,and exit penalties as no one outside of the industry ever understood a damn thing as all they ever acomplished in the publics eye was distrust.

What we have here then in robpitts case is an insurance companies pension plan without external unit trust fund choices where the management of the inhouse fund/s, the buying and selling costs of shares/gilts/bonds etc within them the expenses of the company, it's staff, premises etc etc are all accounted for in the 0.8% anual management charge and assuming the allocation rate is 100% as his illustration implies it also covers the commission/advice fee. Otherwise there is an allocation rate which covers the 3% commision?

Sounds okay to me if you want a robot managing your money aka a tracker fund as theres little leway within it to afford proper fund managers.

robpitt

It still seems slightly unbelievable to me that the plan provider would pay 3% of a transfer value as commission (at a cost to them) just in the hope that I'd leave the money invested with them for the many years it would take for them to recoup their outlay. Can they really be that desperate for the cash?

It seems like a gold mine for IFAs. In my case I have 100+ colleauges in a similar boat all of whom have been [strike]advised[/strike]* that we would benefit from a reduced AMC by switching providers. The total commision could be hundreds of thousands of pounds! (*they explicitly disclaim it all as "not financial advise" ???)

And of course as my plan has no exit penality and so theres nothing to stop me transfering the value again generating another ~3% ad-infinutum for the IFA??? This is clearly unsustainable and ripe for abuse ... there must be a piece of the puzzle I'm missing?

Retired_I.F.A.

It does to me too, though iIve been out the industry for 6 years or so now.
Not exactly a loss leader is it ? your not in a shop where other more pofitable things catch your eye.

The IFA is doing nicely out of it too espescially as your last post says it's an execution only case !!!

If you want a good home for it go find an IFA yourself*, one who will discount some commission, give and be liable for advice not like this one. Bear in mind charges are not everything the better plans have a far bigger choice of funds that are actively managed and let you switch from one to another freely as well as drawdown options instead of annuity purchase when the time comes.

*Unless there is an employers contribution, in which case they may not contribute to a plan of your choice.

dunstonh

It still seems slightly unbelievable to me that the plan provider would pay 3% of a transfer value as commission

3% is quite low. 4.5% is the average and its possible to get 7.5%. In fact one of the lowest charged providers with an an amc of 0.7% on full commission gives over 6%.

Can they really be that desperate for the cash?

In reality most pensions do stay with them and there is a clawback period if they dont.

It seems like a gold mine for IFAs. In my case I have 100+ colleauges in a similar boat all of whom have been advised* that we would benefit from a reduced AMC by switching providers. The total commision could be hundreds of thousands of pounds! (*they explicitly disclaim it all as "not financial advise" ???)

Its fair to say that. Having transferred over £12 million pounds in the last 4 years out of legacy pensions I do have to say i've done rather well out of it. However, you still have to justify it. That is quite easy when looking at legacy pensions but its not so easy with more modern ones.

And of course as my plan has no exit penality and so theres nothing to stop me transfering the value again generating another ~3% ad-infinutum for the IFA???

Loss of agency for the IFA or being suspended by their network or facing FSA action are just some of the thing that can happen (and have happened). There is also the clawback period.

Retired_I.F.A.

dunstonh wrote:

Having transferred over £12 million pounds in the last 4 years out of legacy pensions I do have to say i've done rather well out of it.

Dont say that please, you'll have me thinking of going back to work

However, you still have to justify it. That is quite easy when looking at legacy pensions but its not so easy with more modern ones.

This IFA doesn't have to though he's proposing execution only.

robpitt

"Clawback" is the thing I was unaware of, a quick google including that term and I hit the jackpot ... www.friendsprovident.co.uk/doclib/xsad65.pdf
this is includes insight into how the commission works for my plan.

Indeed if a member transfers away the transfer value commission can be clawed back on a sliding scale.

At least now I understand the mechanisms in place and can just about see where the money comes from and how providers aren't left sitting on a huge loss when a member transfers out.

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As suggested I think I will go looking for an IFA who can actually offer me some proper advice in return for the commission.

Thanks guys! I have learnt a lot this weekend.

Retired_I.F.A.

Thankyou Rob I have too.:beer:

btw there was no clawback on single premium / transfer pensions under the old system I'm used to as the allocation rate covered it ie: the client paid it up front by having say a 95% allocation rate.

MBM

There is still no clawback for pension transfers.

dunstonh

There is with most providers unless the charges are explicit.