pension transfer - any advice folks?

janicearcher

Hi everyone

following meeting an IFA recommendation is to move existing pension funds from S Life to various other funds/fund managers.

Ten years to retirement, fund currently at £213K, 2.5% penalty to be applied, commission & charges for adviser 2.5%. In short an immediate hit of £10K from the fund.

Clearly, a bit decision to be made, and of course no guarantees that new company will outperform S Life. Main contention for move seems to be that the major part of the funds with S Life (with profits totalling £112K) are only paying 4% & 2% bonus rates.

So, in short 10 years to continue building fund, loss of £10K as initial move. Clearly, to make this possible there needs to be a good return from new fund investments. What questions or info should I be looking for to help me make this decision?

sorry if this is a rather broad question, but as a lay person the whole world of pensions is a challenge!

cheers,
jtp

swiss69

These are the sorts of things I would clarify..

It is possible that the 2.5% IFA commission will not come from your fund. Have you clarified this? Some companies will pay this from their own funds as they expect to make it back over the ten year period. They may apply penalties if you decide to transfer from them.

Have you clarified whether it is possible to switch funds with Standard Life without penalty? ( I doubt they would do this but worth checking).

Are the bonus rates guaranteed, and how likely is it that Standard Life whilst not paying large annual bonuses may apply a terminal bonus? Ask them if they have been doing this in recent years...

What are the annual charges at both Standard Life and the recommended companies?

What level of risk would you be taking and how have the recommended funds performed against peer group.

As you approach retirement, do the recommended funds have the facility to reduce risk?

hope this helps

dunstonh

Ten years to retirement, fund currently at £213K, 2.5% penalty to be applied, commission & charges for adviser 2.5%. In short an immediate hit of £10K from the fund.

Are you paying an explicit fee against the transfer value or is it a commission which isnt explicitly charged against the value?

janicearcher

#Thanks to both of you for the replies here.

The commission of 2.5% is to be deducted from the amount invested in the fund, so yes, there is an initial "loss" of £5k in the amount to be transferred, and then additionally the next 2.5% of commission is also deducted at the outset.

Interestingly, one of the funds mentioned by the new IFA is S Life Uk equity income, managed by karen Robertson - this didnt even get a mention in a recent discussion with our S Life "personal adviser"!

Oh my head!...jtp

dunstonh

The commission of 2.5% is to be deducted from the amount invested in the fund, so yes, there is an initial "loss" of £5k in the amount to be transferred, and then additionally the next 2.5% of commission is also deducted at the outset.

A 2.5% explicit charge is generally 0.5-2% lower than what you would class the typical maximum on a SIPP or unit trust based pension (it sounds like what you are getting as personal pensions don't usually have initial charges nowadays).

The transfer penalty you have no control over however, you have to think of that penalty as being spread over the whole of the remaining term. It may be that the annual charges are lower or that the use of unit trust funds instead of pension funds is more appropriate for you.

Interestingly, one of the funds mentioned by the new IFA is S Life Uk equity income, managed by karen Robertson - this didn't even get a mention in a recent discussion with our S Life "personal adviser"!

Standard life don't have any advisers. They have a relatively small number of insurance salesmen in their office but being tied agents they have a much lower remit on what they can or cannot do. Standard Life have made the financial press a number of times recently for stepping on the toes of the IFAs by recommending things which they really shouldn't be doing with IFA clients. SL are the only company to do this and many IFAs are starting to boycott SL because of it. Not really an issue though as SL don't have any contracts that are good anyway.

Your SL pension sounds like a legacy pension. Especially as most SL pensions don't carry a transfer penalty. That suggests it is an old contract. In which case, the available fund range is likely to be quite poor.