I had no idea it was so bad….

My final salary pension is finally exiting the Pension Protection Fund after a 15 year legal battle over the remnants of the company and there is now enough cash to meet the PPF minimum requirements. So I have been offered a pension / transfer value. If I want to take the cash I have to get an IFA assessment, so I’ve been phoning around to see what it costs etc and the market is just shocking…

Considering all they do is stick a few numbers in a spreadsheet someone else wrote and give me the ‘customised output’…

The pension company have a special deal:  £750 where I get a 10 min phone call to answer 12 or so Qs, they plug the numbers into an Excel spreadsheet with some macros and send me the output. This sounded like a complete rip off as I’d like to meet someone for my £750 and ask real questions….

How wrong I was…

The best so far (in terms of ripping the customer off) is £4.5k for which I’m offered a portfolio of tied products (ie ones with high commissions which are of more value to the IFA than to me).

Best so far £2.4k for a meeting and spreadsheet analysis.

Quite a few Cambridge wealth management companies won’t touch you for a pension less than £500k.

No wonder so many people get ripped off.

NB Normally you’d be mad to swap a DB to DC, but I loose the index linking as most of my contributions were before 5 April 1997 which means the main benefit of a DB pension no longer applies (PPF rules). Hence it’s much less straightforward…

It’s the next PPI scandal I reckon, overcharging for piss poor advice.  Ever since the govt made the options more complicated in the name of giving the public more choice it’s attracted all the vultures.

This is where knowing a good 1-man IFA is massively advantageous.  Sadly they are very rare and tend to not need to advertise, relying in word-of-mouth to get business.  I’m very lucky in that my dad knows a few local to him that I have used in the past and I know they are nowhere near that kind of prices for that type of advice.   He’s only taking on work from current customers so I can’t shoot you his way but there must be one near you who is similar so just keep asking around.

Well… I’m not one to hugely defend IFA’s, but…

You can’t have

Considering all they do is stick a few numbers in a spreadsheet someone else wrote and give me the ‘customised output’

and

Hence it’s much less straightforward

Do you want specialist advice about a non-straightforward situation, or do you want someone to plug some numbers into a spreadsheet?

And how much of a pot are we talking, i,e, what %age of that would the £2.4k be, and would there be any ongoing advice/fees paid after that, or is that a one-off?

To be honest I can do the maths myself, but I have to pay an IFA for a report (regardless of what it says) as I need proof of professional advice before I can transfer out.

And yes, it looks like most IFAs want to charge £1000s to sell you products which pay them massive commission and have no interest in your well being.

I am quite tempted to just write my own report and stick someone’s logo on the top, PDF it and just submit that.

>You can’t have/Hence it’s much less straightforward

I meant less straightforward than normal DB to DC, but still trivial to model in Excel (I do analytical modelling / write expert systems for a living).

What I actually want is to pay for an hour of someone time to check all my assumptions are correct and then just continue using my own models.

I’m not going to let anyone manage my money / pick funds for me which is what they all want to do. I do that myself.

This pension is just shy of £200k transfer value. It’s not the % I care about, it’s £2.4k an hour strikes me as exorbitant.

We get free advice via our work company pension, but the chap who deals with us seems to know less than I do about pensions, which is somewhat worrying (having a pension go into PPF meant I ended up studying the pension deeds and all the PPF legislation to try and figure out what I’d get. I guessed correctly what I’d end up with even though I’ve had no valuation figures for over 20 years).

think of the fee as your contribution to the Professional Indemnity insurance premium you will be relying on if it all goes to shit.

I hope that pension is enough to buy you a dictionary 😉

There’s an IFA on here who contacted me when I posed a question about pensions a year or two ago.  If you get an email from a cycling chap based in west Scotland, give him a listen.  He has been good for me.

>think of the fee as your contribution to the Professional Indemnity insurance premium you will be relying on if it all goes to shit.

You don’t get much back as far as I can tell from reading the money section of the Sunday Times. Two weeks ago there was an article about an IFA who lost £600k pension for a couple, they got £50k back each and he carries on advising on pensions completely uncensored. He advised them to put all their pension in some weird recycling scheme which then folded (although after paying him a massive kick back no doubt).

Also not one to defend IFAs willy nilly, but there is a basic minimum of work that they need to do to meet their regulatory requirements.  Also if you are a new customer they have to do KYC and due diligence stuff.  Information is often incomplete and needs to be chased down. There is no room in the regulations to be pragmatic.

Also checking someone’s spreadsheet is far more time consuming and risky for the IFA than using a properly tested and audited third party software package.  Whilst the calculations are not complicated, it is only compounding and a bit of mortality probability, they are sufficiently intricate that they take a lot of checking.

This is a classic example of the cost to the consumer of a highly regulated task.

Suck it up and move on. Think of it as money well spent to be free of the ****.

A few misconceptions in here.  If it’s an IFA, that stands for Independent Financial Adviser, so not “tied” to certain companies’ products.

Second, I’m pretty sure they no longer get commission – which is why you now see the charges up front.

In the bad old days (following the 1980s Financial Services Act), we got between 4% and 6.4% commission on a transfer, but the client didn’t see that because disclosure was pretty light.  Advice is only required (now) if the transfer value is over £30k, so even the basic 4% rate would have meant £1,200 commission to the broker, and potentially up to £1,920.  On your c£200k TV, the ‘old’ rates would have been £8k-£12,800 commission, and there was less work to be done, because regulation was less onerous. (Rates have varied over the years and it’s 25 years since I worked for an IFA)

Seems to me that fees are massively advantageous to those with higher funds, given that they are not generally a percentage of the funds transferred/amounts paid.  Obviously, fees do make advice for poorer people harder to come by.  If you are definitely going to transfer whatever the advice, you might be able to negotiate for the adviser to take their fee from the transaction, rather than from you (that’s possible for some things, but I don’t know about pension transfers, anymore)

>A few misconceptions in here. If it’s an IFA, that stands for Independent Financial Adviser, so not “tied” to certain companies’ products.

You say that, but I have phoned a supposed IFA yesterday who could only offer my “Tied products” (his words). He then tried to convince how great it was by rolling off random financial names such as ‘Goldman Sachs’ thinking it would impress me….

>Second, I’m pretty sure they no longer get commission – which is why you now see the charges up front.

Unsure. The model seems to be they get you to use their own investment platform to buy the 3rd party funds, for which they charge 0.7-1.0% per annum (a lot more than HL etc). This is on top of the individual fund fees. It’s probably only a shim on top of somebody else’s platform.

Where are you? Cambridge?

PM me if you want the details of the IFA I use to manage my pension etc. They’re fantastic and whilst I’m London based (workwise at least), I ‘think’ they’re actually based up in Linc / Cambs so might be of use. I certainly didn’t pay them for initial conversations etc.

(Oh, and my pension pot certainly isn’t huge!)

> If you are definitely going to transfer whatever the advice, you might be able to negotiate for the adviser to take their fee from the transaction, rather than from you (that’s possible for some things, but I don’t know about pension transfers, anymore)

No idea if you can do that. Probably only of you transfer to their platform, which all have uncompetitive platform fees e.g. compared to say Vanguard (0.15% platform fee up to £250k).

You say that, but I have phoned a supposed IFA yesterday who could only offer my “Tied products” (his words).

Then he may be an Financial Adviser but he’s not independent, if he’s advertising as independent then he may well be in breach of FCA rules. He didn’t work for St James’s Place did he? If so, avoid.

Have you tried Hargreaves Lansdown?  I had to go thorugh the same process as you, albeit around 8 years ago so rules may have changed.  HL charged me £500 for the report that you seek – it was complete and utter cut and paste garbage and I never went through with the transfer.  However, if you model your own assumptions and are confident in them, it may give you the independent report that you seek.  You can then stick your cash wherever you want.

EDIT – The HL report was supportive of what I wanted to do but was so poor that I didn’t want to give them any more of my money…

I’m pretty sure they no longer get commission

They don’t often get initial commission anymore, that’s what the punter now pays up front, They will often get an ongoing ‘fee for advice’, which looks remarkable like trail commission…

Then he may be an Financial Adviser but he’s not independent

The whole IFA thing is a bit of a misnomer anyway. They can in theory advise across every product on the market, but they rarely do; they will products and providers that they prefer to work with and they are likely to advise you to use those.

 He didn’t work for St James’s Place did he? If so, avoid.

Why’s that?

Keep shopping around… I paid £500 when I moved my DB pot a couple of years ago.  He was pretty good (for an IFA…) and went through the motions with the minimum of blather.  However I was very clear with him that he could put whatever numbers in front of me he wanted, but he was only getting paid if he wrote words to the effect, “I have explained the risks, the client understands the risks, and I hereby approve the transfer”.

PM me and I’ll give you his details (Hertfordshire).

> “I have explained the risks, the client understands the risks, and I hereby approve the transfer”.

They don’t even have to approve it, you just have to have had advice from an IFA. He can write ‘you’d be mad to move it’ and they can’t stop you….

>Have you tried Hargreaves Lansdown?

Will give them a call…

Yes in theory… but without it in some cases the transferring scheme can refuse to release the funds and the recipient fund can refuse to accept them!  One of mine (the former I think) required explicit approval.  The whole system is bonkers.

Actually, most people have a statutory right to transfer their benefits to another pension arrangement, so the transferring scheme cannot (legally) refuse to release the funds – if they do, complain and (eventually) they will be told by the Ombudsman to sort themselves out.  The current issue is that, where the value is over £30k, they are required to see a statement that you have received advice – the content is prescribed and does not include what that advice was.

No pension arrangement, however, is obliged to accept a transfer and some provider will not accept transfers from defined benefit schemes.

>Have you tried Hargreaves Lansdown?

£1500 (inc VAT) to assess the transfer value.

+ 2% to consider it against my overall portfolio.

So basically £5.5k.

On the plus side they said they won’t accept a transfer if their report doesn’t recommend moving, which is re markedly professional of them.

No pension arrangement, however, is obliged to accept a transfer and some provider will not accept transfers from defined benefit schemes.

So all you do is find one that does (there are a number of SIPP providers that do). Move the pension there, and then transfer it again to the provider you want long term. The second transfer is not from a DB scheme so anyone will accept it.

Well the saga continues. Finally found an IFA who I liked the sound of. Had a one hour chat for free, explained exactly what I wanted to which he agreed, gave him all the paper work and he went off to do the report.

A few weeks later I get back the report. To be honest I was quite disappointed. None of the points specific to me were included, just generic cut and paste phrases and some very basic Excel work. I could have done a much better job myself. However, no real problem as it’s just a legal hoop you have to jump through and the actual content / recommendation is irrelevant, you just have to have had an IFA write a report (daft but true).

So, I then get my pension transfer forms through one of which needs the IFA to sign saying he has done the analysis (and nothing else, no need for a conclusion or recommendation or acceptance of any responsibility other than to confirm my name address). Only the IFA is now refusing to sign the form! He now claims I didn’t tell him the report was necessary for the transfer even though he has all the paper saying it is and it’s a legal requirement which he already knows!

So I’ve (not yet) paid £2000+VAT for a report which is of no use without his signature!

NB for the avoidance of doubt he is a pucker IFA, I checked his registration status on the FSAs website.

So, basically they are all utter scum.

So, basically they are all utter scum.

Person has poor experience with an IFA then brands all IFA’s as scum. Classy, very classy.

What reasons has he given you for not signing?

Seems quite bizarre.

What reasons has he given you for not signing?

Right from the first phone call I explained I only wanted the statutory report and would invest the pension in my existing SIPP (which is Nx bigger than the pension is question). He agreed to this.

He now claims that he can’t sign as I’m moving to my own SIPP and will only sign if I move the money to his company to manage….

Absolute banditry of the highest order.  Crooks, the lot of them.

He can’t be ‘independent’ if he wants you to transfer your fund to his company to manage.

I sympathise. Went through similar carp a year ago. What a complete minefield.

How many of these IFA’s knew less about the financial market?

Another example of the ‘government’ of any colour having high ambitions to open up the market, but just not understanding the unintended consequences of light touch regulation.

As somebody else pointed out ‘attracts the vultures’.

He can’t be ‘independent’ if he wants you to transfer your fund to his company to manage.

Breach of contract as far as I’m concerned. Our company lawyer is out today, but my plan is to chat to her then issue a letter saying ‘sign or I won’t pay’.

https://www.unbiased.co.uk

Ive been like you OP and deeply cynical of financial advisers, the website above was very useful.

Whilst noting that you feel 1% of your transfer value in a fee to administer and sign off your request seems excessive, it is 1% of money you didn’t have before now.

How do you cope with annual fee’s to manage your fund? You don’t see that money either. It’s not money, they’re numbers on a spreadsheet, on a balance sheet, it’s not real.

Thankful and grateful, perhaps?

it is 1% of money you didn’t have before now.

No, I have the money either way. Just in a SIPP I have more control over it.

How do you cope with annual fee’s to manage your fund? You don’t see that money either.

I do, they debit £120 from my current account once a year for the platform fee.

Thankful and grateful, perhaps?

I have absolutely no idea what you’re on about.

Precisely. Happy trails. 😃

Whilst noting that you feel 1% of your transfer value in a fee to administer and sign off your request seems excessive, it is 1% of money you didn’t have before now.

You also seem to miss the main point, they want 1% to refuse to sign off my request.

Did we ever fund out why st James place was so bad? Couple of guys at work were recommending them recently.

https://www.pensionsadvisoryservice.org.uk/

Can’t you just sign the report and send it off? What are the chances of someone checking?

I might be able to help, I’ve sent you a PM! Thanks for the mention John.

Alan

Did we ever fund out why st James place was so bad?

Sky-high fees for average performance.  I can’t understand why anyone would use them.