i have seen an IFA. To advise on my three pensions pots.

Would appreciate some advice, comment on the plans, I’m no financial wizard and just need to sound out the collective wisdom of STW folk.

I have three pension funds worth a total of £90,000.

I’m sixty and probably don’t need to access any of these funds for another 5 years.

IFA has suggested that I move all the three pension funds into a Liverpool and Victoria Flexible Transistions account.

It’s the running costs that concern me a little.

IFA wants 3% of my £90,000 as an initial payment, with 0.5% annual fund management costs.

I would make the 3% initial payment from my bank account to avoid immediately lowering my pension fund pot.

My question is , would It not just be simpler to leave the three pension funds where they are for the next 4 to 5 years?

One of the funds is worth approx £12,000 at present, therefore if I needed to use drawdown in 4 years, then I could just take this and still leave the vast bulk for another rainy day.

Projected growth from the IFA is 5%.

Cheers

If I was quoted nearly 3 grand for that kind of advice, I’d be looking for a second opinion. That just sounds like a lot of money to me.

If a second opinion suggests that’s fair advice but the charges are a rip off, what’s to stop you just moving the funds yourself? (just to be clear, I’d happily pay fair service charges, but not unfair ones, no matter how good advice)

My question is , would It not just be simpler to leave the three pension funds where they are for the next 4 to 5 years?

Presumably you went to an IFA for advice?

Whether you take it or not is up to you, but AFAIK standard recommendation is to take no/little risk for the last few years.

I just have a slight difficulty in shelling out £2,700 for the transfer of my existing three pension pots into one stocks and shares portfolio really.

Not too worried about the risk, but £2,700 initial payout to IFA will take one to years worth of interest to recoup.

This sounds off to me – £3k for a pension switch is ridiculous. Pension switching is a massive risk area at the moment as people are sometimes moved for no better reason than to generate fees for the adviser.

Why would you be better off with your funds in one pot rather than 3? What is the management fee on your current pensions?

The 3% number he has given you sounds like a crock – IFAs have to be upfront about fees charged for advice as of recent(ish) legislation, rather than just getting a commission from the pension firm. Do you think that the advice he has offered you is worth £3k? Incidentally that is why you need to pay from your bank account as the amount is a fee for his services to you – he’s not allowed to take it from your pension pot (unlike in the past).

PS I am not an adviser so don’t take that as gospel. I would just say that the smell test is whether you think £3k worth of time has gone into your financial advice on this matter, bearing in mind what sort of hourly rate you would expect from a qualified IFA, and the risk that he may be taking on by giving you advice.

Is the IFA part of a network?

Hi Denis,

I am an IFA and a qualified Pension Transfer Specialist and happy to give you a few pointers and some questions to ask of your IFA, I’ve sent you a PM with my details.

If the IFA was worth his salt he would tell you not to pay the fee directly from your bank account, I would charge the fee to the Pension fund and then ask you to contribute to the Pension for a similar amount. This way the government will pay towards your advice fee. For example as a basic rate tax payer you make a payment of £2,160 and with tax relief it will be grossed up to the £2,700. Furthermore, if you are a higher rate tax payer you could achieve a further £540 of tax relief through your tax return. This brings your advice cost down to £1,620.

An experienced adviser would have recommended this as a minimum if you had sufficient cash sloshing about.

Incidentally, all the others ranting about appropriate levels of fee and commission don’t know what they are talking about, good IFAs are worth their fees. We are not all salesmen out to make a quick buck

Alan

Thanks Alan

By doing nothing and withdrawing 3k you could have 2 decent bikes, a few holidays ,New windows in a small house,a cheap car,the list goes on,

^^ Even 3-5 years ago when I needed pension advice, I was more than happy to pay for the advice on an hourly fee basis as opposed to “free’ advice that others were getting. Concentrates minds wonderfully.

It removed the fixation with selling products that at least some IFAs believe to be the solution, when all that is looked for is a solution – products ned not be involved.. 🙂

Surprised it’s quoted as a percentage TBH, the guys I used quoted an hourly rate which was high but I was happy with that approach.

If the IFA was worth his salt he would tell you not to pay the fee directly from your bank account, I would charge the fee to the Pension fund and then ask you to contribute to the Pension for a similar amount. This way the government will pay towards your advice fee. For example as a basic rate tax payer you make a payment of £2,160 and with tax relief it will be grossed up to the £2,700. Furthermore, if you are a higher rate tax payer you could achieve a further £540 of tax relief through your tax return. This brings your advice cost down to £1,620.

That doesn’t address whether the £2,700 fee is appropriate – simply says that the fee is mitigated slightly through the tax system (PS feels disingenuous to try and say that the government wants to contribute for this advice via tax relief on pension contributions).

Also that’s the first time I’ve heard that justification for getting the fee paid via the provider – let’s be honest that the real reason is its easier that way because its identical to the commission flow you used to get pre RDR.

Good IFAs are most certainly worth their fees, and the lack of advice for normal people is a pending scandal given recent changes. I think the OPs fear here is whether being charged £3k to be told to amalgamate 3 schemes into 1 is appropriate – maybe he got more advice than just that which would justify the fee…

The key for me in going with the IFA is that in the next 4 or 5 years I can access the flexible drawdown with 25% tax free , with the new government regs etc.

This way the new single fund becomes a different type of bank account that gains interest over and above the bank rate.

Not without risk , life is a risk though……, but over time should be ok and even itself out.

I went through a risk assessment, my tolerance to risk etc and scored a 6, which was slightly more risk than the IFA. Had imagined I would accept.

Therefore the portfolio of investments is slightly more conservative than I might have originally gone with.

Annual reviews of fund performance will be included, but not too concerned on the very short term performance, more concerned with the fund value after 3 to 5 years.

I have recently paid £ 3 k to an IFA for broadly similar advice BUT the transfers were done to move out of some underperforming investments, to move to a lower % charging arrangement and to get a better balance of risk.

I’ll recover the £ 3 k over the next two years from the move to lower % charges.

We have used this IFA for a long time and we trust him because his advice has generally been very sound but, if you don’t have a history with your guy, and you don’t really understand what you’re being asked to pay for, or he hasn’t explained it, I can see why you’d want a second opinion.

So I think what I’m saying is that a good IFA is well worth the money, but you need to be sure you have a good one.

Regardless of fee option, product facilitated or paid cash, it’s not commission. Most products are totally transparent now post RDR. I only mention product facilitation as it is a way of getting HMRC to pay for some of the cost.

The main point for Denis will be likely the existing product will not be able to facilitate drawdown or flexible withdrawals in the manner Denis is looking to achieve. Furthermore, fund choice and performance of Insurance Company internal funds will be poor against a properly managed portfolio. The job cost fee of 3% is pretty standard for this type of advice given complexity, risk to adviser and intellectual property of good advice.

Denis needs to be comfortable with rationale, costs and risks to be taken before proceeding.

The portfolios that I run (circa £30million) generally outperform insurance company funds by an average of 2-3%per annum. This means that fee would normally be recouped relatively quickly (not guaranteed though)

IFA has suggested that I move all the three pension funds into a Liverpool and Victoria Flexible Transistions account a fund that pays him a healthy commission.

Second, third and fourth opinions

Just looked at the “Liverpool and Victoria Flexible Transistions Account” and it just appears to be a SIPP.
Can’t you just open your own SIPP at no initial cost and buy some funds?
Interactive Investor and Iweb do fixed annual charge SIPP’s – no percentage charge.

Is the 0.5% management charge on top of the management charges of any funds he puts in your SIPP?

“Aim to keep fees to a minimum” seems to be the mantra of the gurus out there.
Open your own SIPP and buy your own funds/shares/ETF’s/trackers….

IANAFA

Fees seem very high to me to move you into a SIPP. It is hardly high finance.

Moving into a SIPP seems pointless at this stage – unless you have high fees now in which case moving to II would be a good move. Main thing is to move into less risky investments as getting close to annuity time, if that’s the aim, and so managing that is key. Maybe your current pensions manage this already?

On reflection and a sleep, it might just be easier to do nothing for the moment.

I don’t plan on accessing any of the funds for the next 5 years.
It’s the high cost of the IFA advisor, the 0.5% management fees plus the individual fund fees that are putting me off.

I could look at doing what mudshark has said in my own time over the next year or two,

My ultimate aim is to use the drawdown facility, don’t want to buy an annuity at the very low rates currently being offered.

Regards

Denis

Do you have to pay a management fee? Just pay the IFA when you want something doing

Do it yourself, it’s easy. Last year I consolidated 4 pensions into one – only involved 2 phone calls, 3 forms and a couple of letters. The recipient pension provider took care of all the logistics – call them first. Cost to me = £0, in fact long term I’m saving money due to reduced management fees.

good IFAs are worth their fees.

Not in this case. The advice the OP has been given is terrible, on multiple levels – product, fee, ongoing charges…

We are not all salesmen out to make a quick buck

IME the vast majority of IFAs are exactly this. The problem with the pension industry is that much of it is deliberately structured to obstruct and befuddle the humble retail investor, and folk who are less well informed are therefore forced to use the grossly inefficient wholesale channel via IFAs, with all the associated bullsh!t and expense.

What is the general consensus regarding IFA and their advice? I have a meeting set up for tomorrow to set up a pension and some long term savings. Not very complicated as i have a Military half pension only.

Do i see maybe 2 or 3 or just take a fair bit of time over the decision and do my own research on what i am offered?

The further I have looked at This, the more bewildered I have become.

I genuinely thought it would be an easy(ish) process.

I’m not against paying for good advice, everyone has to make a living, I certainly didn’t work for free…

But 3% of my total pension fund, plus 0.5% a year to the IFA is a little high in my opinion. Then there are the individual fund management fees of typically 0.5% as well.

All included in this is the fact that the money is floated on the stock market and the value is subject to the world economy.

Yep, I know that there are no guarantees in life, but it does seem like the pension fund(s) that I have always paid into now have a captive market to provide them with money from our collective pension pots.

I’m almost tempted to take a short term 6 year annuity to top up my final salary pension until I’m 66 (in six years time)to protect the savings I have (albeit in ISA’s).
At least this way I am in control of my finances, without worrying about the performance of the stock market and how much I might have lost or gained in the last month.

I would rather be getting on with life without work and riding my bike up at Afan and the South Wales routes.

Ps

Not all doom and gloom.

Just been to the gym for 2 hours, now at home, cup of coffee, some gardening to do.

Off out on the road bike this afternoon for a quick jaunt.

The further I have looked at This, the more bewildered I have become.

Wasn’t this the reason why you went to see an IFA in the first place?

yes,but there just seem to be so many choices.

The cost of the advice I have been given does seem to be inline with what the IFA propose, but I can’t help feeling that I had to work quite hard and long for £3000.

This does seem to be a high cost to me.
Regards

Denis