Nucleus: Look out for Ryanair pricing

The administration cost charged to book a Ryanair flight is £6. You can only make bookings online, which means using a card (with a few infrequent exceptions), so the cost of flying with Ryanair is the advertised flight cost plus the card admin fee.

If you can avoid taking along an infant and don’t need any hold baggage, to buy anything to eat or drink, go to the toilet or myriad of other things, you might avoid further costs.

Despite all the admin costs and extras that many might consider essential, Ryanair is pretty transparent about its costs through a dedicated section of the website and I don’t think many travellers will be surprised by the ancillary costs related to personal comfort. Ryanair is well known for its model and is unashamed of it.

An uncanny parallel to the Ryanair pricing model exists in the UK platform market, except with bells on – very big bells.

Price articulations and comparisons of platforms currently include core costs, essentially the platform and fund – the flight in the Ryanair model – with, in some cases, the option of including basic switch charges.

However, there are many instances where consumers can also be charged significant extras for services that are not optional to their needs (“I’m sorry I have hit retirement but I cannot help ageing”).

I do not think any platforms seek to hide their additional charges but where the platform market differs from Ryanair is the level of consumer transparency.
The choice of a platform by an IFA for a client can be made on the basis of solely the core costs. This is where the market is at in relation to price-comparison tools.

When ancillary charges may materially change, and in some cases by very significant amounts, what that client will actually pay for is the services they need.
The market needs to evolve to a place where IFAs have the ability to easily evaluate real costs for their clients, based on their agreed/planned course because this really matters.

To put this in practical terms, if you consider a pension pot of £150,000 – a not unusual amount when reaching the drawdown stage – this would not come close to providing the sort of income that a moderately paid civil servant with an average length of service would receive.

Yet, based on a customer making an initial investment, regular switching, an in-specie transfer and going into drawdown, I have calculated that a customer could pay a range of charges between £1,700 up to £8,000 in year one, depending on the platform used.

From such a relatively small pension pot, an extra £6,300 is a lot of money. In this example, much of it is attributed to initial charges that only apply in Sipps (with some platforms) or if certain funds are used.

This is why it is vital for IFAs to look under the bonnet of platforms to find out what their clients will, or may, pay for the services they are going to need because once a client is on a platform, they are in that charging environment and liable to the costs of that platform – and needs constantly change.

In nearly every case, the extra cost has a far higher financial impact than a £6 admin fee that has been considered excessive by the Treasury and is going to be banned.