should I buy a pension?

EdInvestor

dunstonh wrote: »

Currently, some of the best personal pensions factory gate charge the annual management charge allowing you to get around 0.3% annual management charge on internal funds whilst still paying the IFA for their advice.

Could we have a translation of the term "to factory gate" [a charge] please?

:) .

something_girl

Thanks all. I think it's probably time I went to see an IFA, don't think this is something I can do on my own.

dunstonh

Factory gate is a phrase you are likely to see more of in the coming months and years if you follow financial services. It does actually surprise me that you havent seen it yet Ed although I can understand the typical consumer not having a clue.

Basically, the FSA wants to stop providers setting the level of remuneration that is paid to advisers, agents, brokers etc. It wants the "product" to be retailed at a factory gate price and the adviser/broker/agent will then add their fee on to it and that fee will be agreed by the client by some form of agreement (although sales reps will be exempt from this and work the current way).

Some providers have already started offering products at factory gate prices where the same product will be available to the IFAs at the same price(*see note below) and the only differences will be what charges/fees the IFA adds on themselves. Pensions seem to be an area where this works well as the annual management will no longer fund commission for the life of the plan but just enough to meet the fee agreed at the outset. e.g.. if fee was £1000 then the annual managment charge would be higher for 5 years to pay that £1000 then revert back to "factory gate" charge unlike the current model where the annual management charge stays high forever.

*note. Factory gate pricing has yet to be set in place by the FSA and still may not be in the current described form but already providers are offering discounts to certain distribution channels. i.e. Clerical Medical supply a product with the amc 0.3% lower to my network than they do others so one IFA can get the product cheaper than another which isnt really the proposed aim of the FSA. Although I suspect that they will allow some economies of scale changes to apply. After all, economies of scale distributions exist in every other retail area.