Commission over advice is a no-brainer
Fees good, commission bad? Let clients be the judge.
In a first meeting with a new client today, we add-ressed how he would pay for advice. He had exper-ienced horrors of indemnity commission and was keen to explore fee-based advice.
I estimated it would cost about £600 to set up his new plan and £600 a year to deliver bi-annual reviews. That is not much, I hear many IFAs shouting, you can’t deliver value for that.
Well, believe me, you can if you are organised and using effective technology.
The client pays higherrate tax and is looking to contribute £1,000 net a month, grossed to £1,250 with BR tax relief and claim extra relief via his tax return.
His choice – write me a cheque for £705 (£600 plus VAT) for set up and then £705 plus VAT each year or earmark £480 of his first month’s premium and a £480 “adviser fee” each year in the knowledge that he would not only get tax relief but also additional higher-rate tax relief.
His words were: “It’s a no-brainer. Who in their right mind would opt to pay for pension advice by a fee when the revenue is willing to pay 40 per cent towards the cost?”
I could not offer any answer other than tell him some observers still believe that fee-based pension advisers apparently treat their clients more fairly than advisers who are commission-based
“Extensive” research indicates that few people in the UK are prepared to pay fees for advice leads wrongly, in my opinion, to the assumption that the public don’t value what we do. They certainly value what the majority of IFAs do but will avoid a fee so long as there is a cost-effective alternative or, in this example, to quote my client, it’s simply a no-brainer.
PCM Asset Management Morpeth
Reaction to news that the Government is to cut the annual pension allowance to £50,000
However, it is a step back for are people with income below the £130,000 threshold who were wanting to make contributions in excess of £50,000 a year. How many people actually fit into this category?
To my mind, those clients wanting to make contributions above that amount each year are generally earning significant levels of income and were caught by the £130,000 rule anyway.
In addition, the facility to carry forward unused allowance will give people the potential opportunity to make bigger contrib-utions if a one-off situation arises, for example, a settlement.
Finally, the rules are simple and clear which is another massive step forwards and does have a genuine whiff of pensions simplification.
I, for one, think this is a positive move and will be positioning it as so with all my clients.
Just be thankful that I am not the one in charge, I would have set the figure closer to £30,000
While these cuts will not affect most people, they are just more negative news about pensions and will only add to the general perception that this Government is no better disposed towards pensions than the last bunch.
And what is being given in return? Repealing the tax on dividend income? Nope. Reintroducing WoP and life cover? Nope. Freeing pension funds from the annuity trap and GAD rates? Nope.
This sends out the wrong message to the ordinary saver:
1: It draws attention again to the high earners – there is a great interest among many people in the politics of envy
2: This is unfair treatment of most of us when top civil servants, judges and the like don’t have the same – so don’t talk to me about fairness
3: The message it sends out to everyone can be, “Don’t save for your pension because we intend to keep tinkering with the rules”
4: This is not going to save billions and it is going to stop money which would have been invested for the future from being invested.
All in all, I regard the announcement as further evidence of a lack of understanding of pensions and a pandering to the politics of envy.
Norm d’Plume </B><B>mortgages