Im transferring 2 older pensions into a new scheme recommended to me by a financial advisor
For the first year, the adviser is charging 17% of my contributions plus a fixed fee for the transfer every month. Is this a high percentage and am i being ripped off?
That percentage certainly seems excessively high, but it depends on the size of the fund being transferred.
This is because there are some fixed costs involved in giving the advice and doing the transfer in the first place. However, I would not expect these fixed costs to amount to more that £500 to £1,000.
Then there are the variable costs to do with the size of the fund and the level of complexity and the service being provided. The point being that the larger the pension fund the greater the risk to the adviser and his professional indemnity insurers if the advice is deemed to be wrong in the future, but this should be covered by the fact that the percentage fee is of a larger amount, not by having a larger percentage.
Having said all that, I would say that 3% of the fund value with a minimum of £500 to £1,000 would be a much more reasonable figure and I am sure that, like us, many efficient advisers could do it for less.
Unless your two existing pensions are in old style contracts and only have capital units, I do not see how the fund value in the new pension could ever catch up with and then exceed the fund values in the existing plans when the new plan is starting with 17% less money in it.
The adviser is only doing the transfer once so I don't see why the fixed fee is "for the transfer every month". If the fixed monthly fee is for something else, then it may or may not be reasonable depending on the fee and the service that you are getting for it.
Perhaps you could tell us what the fixed fee is?
I hope this helps. | 12.12.11 @ 16:37
Hi Martin, what company has he transferred you to, and what funds is he recommending.
Did he use a comparison system to see which were the most competitive companies with regards charges? Also what is the value of the two plans you are transferring? What will you be getting for the 0.5% per annum?
| 12.12.11 @ 20:19
This is a very strange basis for the adviser's fees. Whether or not it is excessive really depends upon the amount of work he has done for this, the quality of the advice, and the total fee charged. It seems that the fee consists of the fixed amount plus two months premiums - so what does that amount to? For such work, I would expect the total fee to between about £250 to £500 or so, if it is very straightforward, and rather higher if there has been a lot of work.
If the fee is out of proportion to the size of the pension funds then one would have to ask who is benefiting from the transaction. | 02.27.12 @ 11:24
Martin Flower [ Pension Transfer Questions ? ]
The question is now a bit dated of course, and at face value is not easily answered as one does not state the individual or combined value of the pension pots in question. I am not questioning any of the advices given by others above. Essentially, they are all quite relevant and broadly on the same par overall. I do agree though, that the fees are very high for what should be a very simple case of transfer and management.
Should it be the case that individual pension accruals amount to over # 50,000 GBP, then there are very compelling reasons for the consideration of transferring same pension pots into HMRS approved schemes offshore. There are naturally conditions that apply for this facility to be granted at outset. There are also fees involved in setting-up such schemes at around # 700 to # 2,000 GBP at tops.... according to complexity and all tax mitigation issues involved undoubtably.
These are one-off fees at pretty much an industry standard. You are not compelled to enter into any asset management contracts, and can usually manage the new Offshore Pensions Bond very easily yourself with free investment advice included. Should you elect for professionally managed bond accounts, then the basic fees are around 1.25% yearly.
I would say that if your collective pension pots are substantial, then take independent advice from at least two domestic IFA recognised consultancies, and equally, two professionally IFA qualified ' Offshore ' corporations.
One must also take into account: Level of fixed rate income gains. Tax on income potentialities. Ultimate IHT predations and transfer of estate upon mortality.
Offshore investment benefits & tax mitigation may not be suitable, or even accessible to UK domiciled nationals, and potential costs involved might outweigh the strategies for doing so across the board inter-alia. The main point being, do not act upon any first opinions proferred at outset.
Pension savings and their security are important. Take a bit of time to research all options as decisions made in rash are mostly hard to resolve or remedy in the future ! | 04.11.12 @ 19:02
Sounds to me like SquareInsider is pushing QROPS or offshore bonds, both of which are expensive and not suitable for most people. Also QROPS are in the line of fire from HMRC who have just closed a whole load of Guernsey based schemes. Be very careful indeed. | 04.23.12 @ 17:26