My company making me move pension providers

dunstonh

How do I approach the charges being high, can I haggle?

I suspect this is a group personal pension rather than a load of individual schemes. The charges are a bit high. The 1% bit covers the standard initial commision (which will be around 6% on lump sums) and then on top of that you have 0.5% being added for trail. You would expect some discounting on the initial commission to make up for the taking of trail making it about .25% cheaper than it is now on average.

However, it does need to be noted that if you are getting proper ongoing servicing with this adviser and he is also doing all the admin for the group scheme rather than the employer having someone do it and the employer isnt paying for that explicitly (i.e. a charge agreed which the employer pays out of their money) then you would expect a higher amc.

liverpoolcarl

It is a group personal pension.

I have spoken to our account manager and he has said that they transfer the sheme money deducted from payroll to the IFA who will pass it onto to Scot eq.

Shall I leave this as it is and not approach them ?

dunstonh

You cannot go direct. Group schemes belong to the employer and servicing IFA.

Well, I will re-word that, you can go direct but the IFA will be paid the same regardless and you wont get better terms.

liverpoolcarl

Sorry Dunstonh, I meant approach the IFA about reducing there charge slighly or just leave it seen as they are managing it?

jamesd

If the adviser is getting 0.5% additional, is the adviser also getting any commission paid out of the base 1% and if so, what is the total commission being paid to the adviser? Sounds as though the initial commission from the 1% standard plan charge hasn't been declared and the IFA is adding 0.5% extra commission each year.

Does the adviser offer a fee option that is a genuine alternative to commission (not just the same as commission to encourage you to accept commission payments)? If an IFA it's required (for personal customers, maybe group plans might be an exception?). What would be the fund charges if you took this option?

You can usefully mention to your employer that this seems to be about 0.25% more of the total pension fund value each year than a really competitive IFA would be charging and ask them to discuss this with the IFA to see if they can get a better deal. This is particularly significant to the employer if they want to encourage employees to pay bonus payments into the pension and there are employees paying higher rate tax. The current charges are high enough to encourage employees to take the bonus as pay then pay into their own personal pension, and cause the employer to pay employer's national insurance on the bonus. If it was charged to match really competitive deals, the employees might use this one instead and save the employer that NI.

Dunstonh, does the adviser need to be specifically authorised to handle the money when the company is paying the IFA, not Scottish Equitable? If so, liverpoolcarl should verify that the adviser has the authorisation via the FSA site, for fraud protection.

You should also ask if your employer can see your investments and how much they are worth and how you can prevent this if you want this to be private information.

Given the pricing here, you should not make any contributions to this plan beyond those required to get full matching from your employer. You can get a better deal elsewhere for the same pension for any significant extra contributions. Though investing via a stocks and shares ISA would probably be a better idea, to get extra flexibility.

What is happening to the money that is in the Clerical Medical pension fund already? Any commissions being paid for switching that over, if it is being switched? Anything forcing you to switch it to this plan instead of another one (even this one at a lower cost from a more competitive provider)?

EdInvestor is right that the 40% are very cautious but that's not a bad idea right now for the UK, so it's not something I'd be concerned about this year. If you start to see lots of stories about a stock market recovery, and in any case at a review in a year's time, you should ask if it's still appropriate to be so cautious in the UK.

Those funds are all from the standard range and Scottish Equitable says that the usual annual management charge for their standard pension fund range is based on 1%. Here are the extra annual management charges for each fund:

Scot Eq Select Reserve - 0.1%
Scot Eq 80/20 Defensive - 0.05%
Scot Eq Index Linked - 0%
Scot Eq Cash - 0%
First State Asia Pacific Ldrs - 0.95%
UBS Emerging Markets - 0.45%
Invesco Perpetual Income - 0.95%
Newton Higher Income - 0.4%
Fidelity European - 1.25%
JPM Natural Resources - 0.95%

Assuming I didn't get any of those wrong, at 10% for each fund that comes to 0.51%, not 0.59%. This doesn't actually matter much: you can't avoid paying these costs and they aren't in any way negotiable. Just cross-checking the adviser and telling you that yes, these are OK and do explain the extra for the funds selected.

liverpoolcarl

The pack I have been given says, commission for arranging the plan is £693.03 immediately. £26.97 during year 2, £240.33 during year 10 and £3,156.87 at maturity.

Not to sure about the fee option, I would have to ask.

My employer pays 4% and I currently pay 4% plus an additional 4%.

My employer can not see my investments.

The money at clerical medical will be transferred over once the new plan is up and running.

bigbloke45

Get a Life!

dunstonh

Dunstonh, does the adviser need to be specifically authorised to handle the money when the company is paying the IFA, not Scottish Equitable? If so, liverpoolcarl should verify that the adviser has the authorisation via the FSA site, for fraud protection.

To be honest, the employer would submit the details directly to provider and the IFA would not get involved unless there are new employees and servicing. In the short term, the IFA may be helping the firm with the input and recording of data but I doubt the money is going to the IFA and I would be on guard if that was the case.

The adviser is not setting this scheme up cheap but it could be that the employer is not paying the adviser and it is being passed on. However, we are really only looking at around 0.25% p.a. between best and worst on a scot eq pension (i.e. if initial commission was reduced a bit then it would only knock around 0.25% off). Group schemes are expensive to administer and can be time consuming but they also pay well.

bigbloke45

Your investment selections are random based upon the vanity that you have a choice. You have no idea what they mean and what the outcome will be.

You think you have been in control during your meeting with your IFA by choosing your funds, but you are wrong. You have done the same thing as "kicking a tyre" when you buy a second hand car. He doesn't care because he will get the commission regardless of what you decide.

All of the comments on this are "conversation".

Stick with what you've done or change it, then move on and get on with your life. Otherwise you will always be chasing rainbows.

liverpoolcarl

Bigbloke45, I thought this was a forum for conversation and advice wasn't allowed hence a conversation to talk about various options and questions I have so I can learn about pensions.

I have no issue with the IFA I am dealing with but he is not getting paid to teach me about pensions which I would like to understand which is is why I am posting on this site.