Pensions Advisors

[Weststander]

Sure, I have no problem with paying for advice. But at 5%, a £500,000 final salary pot would mean paying someone a years wages, £25,000, for some advice and that is not a reasonable charge. So is it negotiable, or is it a fixed charge?

5% or £25,000 is excessive to save the least. These articles explain all:

http://citywire.co.uk/new-model-adviser/news/db-transfer-boom-blighted-by-cost-complexity-and-claims/a854823


https://www.unbiased.co.uk/cost-of-financial-advice

 

[adub68]

I recently went through a consolidation of four schemes into a single SIPP. If your pot is over £30k you are legally required to seek advice. My pot was large primarily as a result of being offered a 40+x multiple buy out on a defined benefit final salary scheme by a former employer. Agree with the comments above with taking your time to research finds and platforms and to decide on risk appetite and objectives. Most if not all final salary schemes (certainly private sector) will have an obligation to give you a transfer value - that once given is required to be capable of acceptance for 3 months. I understand the rules are different for public sector schemes - where there are limitations on transfers. I was offered the 1% of fund value as the cost for the advice but negotiated this to a fixed fee that was equivalent to 0.4% of the fund value

 

[WATFORD zero]

Sure, I have no problem with paying for advice. But at 5%, a £500,000 final salary pot would mean paying someone a years wages, £25,000, for some advice and that is not a reasonable charge. So is it negotiable, or is it a fixed charge?

From my experience (and i'm not an IFA, just a punter with an interest !) I have had various quotes ranging from no percentage fee (and them taking the charge from the management charge of the fund being transferred to) to a percentage of the final salary transfer. And on most that I've had this is only if you transfer. If you decide not to transfer, the cost of the report can be a relatively minor fee.

I've generally found that the higher the transfer amount, the lower the percentage charge, with cutoffs. IE 30K, 60K, 100K, 250K etc. I've had a few transferred and 5% on £500,000 sounds high to me.

Although the charges may look high, you need to balance them against what a good IFA with good advice will make for you on those investments. I've tended to find that the ones I've chosen haven't necessarily had the lowest transfer fees although this may look more attractive in the short term.

As someone once said 'ees complicated'

 

[dazzer6666]

Anyone attempting to charge 5% for the advice is really at the very, very top end. Unless your finances are horrendously complicated, most advisers will look more towards a fixed fee for the advice (it's a fair amount of work and the final report will be pretty long). From the research I've done (prior to cashing in a defined benefit scheme I had), somewhere between £1 &2k seems to be the norm.

Typically, if you decide to opt out of the pension scheme and go for a SIPP instead, the agreed fee for the advice would be discounted/refunded against the first year's management fee if you decide to leave your investments with the same adviser. Ongoing fees for management of the fund after you've put it into a SIPP again depend on the adviser, size of portfolio etc but expect to pay between 1-2% per annum for 'normal' funds (covering both the fee for the management, and for the platform charge depending on where the investments are held)

The report you'll get from the Advisor prior to making the decision will very clearly lay out the advantanges, disadvantages and risks of deciding to cash in.

Everyone's circumstances will differ but for me the transfer value was much higher than I expected (quirk of very low annuity rates currently). Amounted to almost 40x the value of the guaranteed pension I was due at age 60.

 

[Bulldog]

Really useful stuff guys, thanks. The valuation I have just received puts me at about 30X the projected pension at 65, 2 years from now. Unfortunately my company doesn't allow anyone to transfer out and still work so i must decide if I want to quit now and get the big pot or work on for another couple of years and risk the pot shrinking as interest rates go back up. Tough call.

 

[Steve Foster]

Hi Steve

1 quick question, is it true that advisers charge 5% of the pot for people transferring out of a defined benefit scheme into a draw down scheme?

5% is excessive. Any decent IFA firm will have their charges on their websites, or as mentioned previously give of their time (first meeting) & then confirm in writing the charges before commencement

 

[afcb]

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[Steve Foster]

I have a final salary pension with a transfer value of nearly £100K...it was from the 80's

I've retired early on another very good pension . Why should I have to pay an IFA to access this money early when I am already financially secure for life ? There should be some kind of means testing before I'm put in the hands of someone who will state the bleeding obvious and politely take several grand off me in the process.

That aside MSE is extremely useful for anyone in the same boat

http://forums.moneysavingexpert.com/forumdisplay.php?f=19

The previous government put in legislation that for certain pensions including final salary benefits, individuals have to obtain financial advice before benefits can be released. This is to protect the policyholder & of course the taxpayers in case you spend/gift your pensions then full upon the state. The banks don't provide this advice (they keep getting fined by the regulator for poor advice & have no concept of ongoing reviews/advice). This means it is left to IFAs who are better qualified, independent & unbiased. Our regulator states that releasing occupational benefits should be a last resort & an actuary has to be involved in every calculation (costs). Hope this helps.