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How much are advisers charging for pension transfers?

pension transfer chargesDefined benefit pension transfer charges are being put under the microscope again as the regulator turns over more potential conflicts of interest.

With the British Steel Pension Scheme the latest to dominate headlines and the FCA ready to interrogate further as it extends its review to include all firms authorised to give pension transfer advice, case complexity and risk is forcing advisers to take a hard line when it comes to accepting clients and deciding on what to charge them.

There are currently 7,608 Personal Finance Society members with a statement of professional standing and a pass in at least one of the three pension transfer exams G60, AF3 or AF7, figures provided to Money Marketing by the professional body show.

Many will only take on pension transfer business for existing clients or charge significantly more for newcomers, however, while others will insist on a wider financial planning review process.

Mazars chartered financial planner Natalie Wright says new clients looking for a standalone piece of transfer advice will be turned away.

She says: “If they are just looking at unlocking value and are not interested in the wider financial planning aspect, we are not going to take them on.”

Wingate Financial Planning director Alistair Cunningham receives many enquiries from scheme members looking for a “tick box” exercise.

“They ring up saying a firm is trying to charge ‘X’ so they are looking for the lowest possible quote. They are probably not the clients for us.”

Typically charging a fixed fee, rather than hourly rate, Cunningham says: “Pension transfer cases would typically be £3,000 – more if there’s more than one pension under advice. More general, but non-DB transfer-related financial planning starts from £600.”

Addidi Wealth founder and managing director Anna Sofat also differentiates between new and existing clients, normally charging a fee for conducting the initial assessment.

“That fee varies, but we have set a minimum of £2,500. We used to charge £1,500 in the past but we found with the amount of work involved we were not even covering our costs. Having said that, £1,500 for an existing client may be acceptable but £1,500 for a new client is not.”

Sofat says there are other variables, such as the number of schemes the client is in, the level of familiarity with the scheme, and the ease with which you can deal with the provider.

“If it is a scheme we already know, we can be a lot more cost-efficient but with one we have not come across before there is a lot more work involved.”

LEBC The Retirement Adviser outsources its initial transfer analysis to O&M Pension Solutions, among others, for an average cost of £400 per case. In 2015 this was £175 per individual case.

Transfer specialist HDIFA, whose permissions were temporarily suspended after an FCA audit, said it had updated its fees since they were previously reported, but declined to comment on the new structure.

LEBC splits its business into two types: project-based work where the trustee and employer pay for their services; and advising individual clients, who pay an upfront fee directly, whether the transfer goes ahead or not. The firm typically charges £2,500 for this review.

Managing director Nick Flynn says subsequent work for any review then needs to be priced “sensibly”, based on an hourly rate.

In terms of hours spent on follow-up advice, he says 15 hours per DB transfer case is about average.

“We have seen a lot of charging at 3 per cent or 4 per cent, which – if the value is around £200,000 – will be a reasonable amount. But if someone has £800,000 or £900,000 then it becomes a huge chunk of money and starts to look like commission, to be honest.”

He says the rise of contingent charging – the model through which an estimated 90 per cent of BSPS members chose to pay for advice, according to advice firm Active Wealth, one of the firms involved with British Steel transfers – looks set for greater regulatory scrutiny.

Flynn says: “If I recommend you to something and you do it, that is considered contingent or commission. Some people are happy to pay it but for me, it does not seem to be in the spirit of things.”

Sofat agress that if you have a lower upfront charge but a higher charge – say 3 per cent – on any transfer value, there is a bigger incentive to recommend a transfer out.

“We stick to 1 per cent, which will cover our cost base, but because the initial report fee is at fair value, we can walk away at the end of that with no concern either way if the transfer goes ahead or not.”

At Tenet, adviser charges average £150 an hour with regional variations yet group risk and regulatory director Caroline Bradley says most appointed representatives charge “industry standard” 3 per cent initial and between 0.5 per cent and 1 per cent ongoing, depending on service levels.

She adds: “Those charges might be discounted if the client has a particularly large portfolio, because a 3 per cent charge on a pension of £500,000 is £15,000 – a very large sum.”

The FCA has been investigating the role of introducers and has expressed concerns over the influence they could have over authorised firms, such as financial advisers.

Writing to work and pension select committee chair Frank Field earlier this month, the FCA reiterated it had concerns over working with unregulated introducers and lead generators.

For the BSPS, unauthorised introducer Celtic Wealth Management reportedly referred 76 scheme members to Active Wealth. With average fees per referral as high as £750, the total amount earned has been estimated as £50,000.

LEBC’s Flynn recalls scenarios where clients have paid an introducer to “find them an IFA” where both parties physically share an office.

“It strikes me as a money spinner. I would not have thought there was the need for an introducer; there is more business opportunity than there is good IFA capacity.”

Pension transfer charges — a historical view
By Sam Brodbeck

Money Marketing research back in 2015 suggested that advisers and networks were charging wildly different prices for advising on defined benefit to defined contribution pension transfers.

As well as a split between charging on a time cost or percentage basis, some firms appeared to be charging as much as two times more than others.

Firms that offered pension transfer outsourcing also reported growing interest as volumes increased and the FCA’s new requirements left less advisers qualified to do the work.

Interest in DB transfers had risen as members became aware of the greater flexibility and favourable death benefits available to defined contribution pensions.

One network that asked not to be named said the current range for this type of work was between £700 and £1,200, with an hourly rate or minimum charge model becoming increasingly common among its advisers.

A spokesman added that the size of the pot “does not necessarily mean less work – although the options may be more limited and the time spend reduced as a consequence”.

Sense compliance director John Netting said: “It’s pretty dangerous for networks with appointed representatives up and down the country to have a one-size-fits-all policy. Notionally, most of the people doing DB transfers are on about £200 an hour billing rate – it’s not a simple area and most people holding the relevant permissions tend to be at the upper end of chartered in terms of qualifications.”

Intrinsic would not give an indication of how much its advisers charged. A spokesman said: “Intrinsic appointed representatives do not have a standard fee. Each adviser is able to set a percentage or fixed fee themselves.”

Advice firm Portal Financial charged 5 per cent of the value of transferred funds. A spokesman said this was because the work was “high risk” and required “lots of analysis and G60 qualified advisers”.

In contrast, Fairey Associates managing director Ed Fairey said they “normally” charged clients around 3 per cent.

Wingate Financial Planning financial planning director Alistair Cunningham said his firm used a time cost model and usually expected the work to cost around £2,000. He added that transfer advice was the only major service the firm did not offer on a fixed-fee basis because of the “open-ended nature of the work”.

Towry head of retirement planning Andy James said the advice firm typically charged around £3,000, depending “on the complexity and time taken”.

LEBC undertook transfers as part of exercises that were driven by corporate sponsors trying to reduce their DB liabilities, as well as individual cases. Divisional director of longevity Nick Flynn explained the firm used O&M Pension Solutions to undertake transfer value analysis, which cost £175 per individual but fell for bulk exercises. In addition, clients were charged on a time cost basis.

He said: “If you’re doing hundreds of transfers at once as part of a big project you might get the cost down to £600 a transfer, if they are looking to go into drawdown that would probably double.

“On an individual basis, the bill would be quite a lot more because there’s no economy of scale. It’s probably more like £3,000 or £4,000 on a time cost basis – it’s not a cheap bit of work, because it is not simple.”

Specialist retirement adviser Intelligent Pensions charged clients not immediately vesting their pension £1,000 to generate a report, including running a transfer analysis and issuing a suitability letter. Those at the point of retirement were charged £750. However, clients were not given the certification to allow them to get the transfer done without an adviser.

If the transfer went ahead, the firm charged 1.1 per cent of the transfer value and placed the funds in a product recommended by the firm.

Intelligent Pensions technical director David Trenner added that there was growing appetite from other advisers to outsource transfer business.

He said: “More and more financial advisers are interested in our service. We’ll advise on the stage in-between, charge 1 per cent for implementation, and then stand aside for the investment advice offered by the other adviser.”

Pension transfer specialist HDC accepted referrals from authorised firms for pots worth £100,000 or more. An initial suitability report cost £300. Following a transfer the first £150,000 of the fund was charged 2 per cent, the next £350,000 at 1 per cent, the next £500,000 0.5 per cent, and 0.25 per cent on anything above £1m.

HDC managing director Heather Dunne said business had grown “exponentially” in the last few months up to June 2015 as clients became aware of the pension reforms, and the FCA introduced tighter requirements on transfers.

Money Marketing first reported on DB transfer charges in June 2015. We have now updated this article to include the latest trends.

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Comments

There are 98 comments at the moment, we would love to hear your opinion too.

  1. 3k min in our firm ,

  2. I’m an ex financial adviser and have various pension coming out in 3 years time. What is the legislation now? Can I do it myself? Can I do it execution only? What’s the cheapest way I can do it, as I already understand the ins and outs pros and cons etc?

  3. I think (as an Adviser) that £9,000 charged for a £1million pension transfer is steep. I appreciate that some cases might be more complex than others, but there is a general process required that say for a fund of £150,000 (£3,000 charged) and a fund of £1million (£9,000 charged) that I wonder if the extra £6,000 can be truly justified… I am prepared to be shouted down… so go ahead please… G

  4. There are no grounds for charging a % of the pot value, there should be an assessment, a report, and a letter saying that the client has understood the advice and has chosen to make the transfer. The cost for that should be the same whether the pot is £100,000 or £300,000, and should be based on the number of hours taken to do the task.

    • Rest assured, your PI insurer sees far more ongoing risk in a £1,000,000 tramnsfer than a £100,000 one. Further, your PI and regulatory costs are charged as percentage. Need to fee based on value, expertise, RISK and profit.

  5. It always amazes me how we can all provide our thoughts on how there can be “no grounds for…” or “no justification for….”. The only correct way is this: Those who give advice to any client for any line of business have the absolute right to charge what they like and in any way they like as long as the client knows the amount and will pay it, end of conversation on the matter. It is not for me or anyone else to judge whether that is right or not. We can all have opinions and should give the opinions of course but it should be us saying what we would do in that situation and not slating others who do the business their own way. Personally I would certainly charge more for a larger pot for one reason only. If I lose any subsequent complaint that is lodged I stand to have to pay 3 times more in compo for the £300K client than I would, the £100k client. If anyone would like to charge the same for larger pots thats up to them but I would not put myself in the situation of having to pay larger compo without having first had the larger fee. If no complaint ever comes in then the client is happy with the outcome and I have been well paid for a job well done, so why would it be an issue? I think that makes good business sense and we are, after all is said and done, business people first and foremost. As ever off for though and just IMHO.

    • They have the right to charge what they like for advice, but this is advice I don’t want but am legally obliged to seek before I can access my money.

    • Basing your charges on the possible complaint you may subsequently receive for the advice given is a frankly shameful reason.

      Do you not believe that the advice you give is suitable, and can you not subsequently prove that to be the case?

      If I was told by anyone that they are charging me more because there is a risk I will complain I would automatically lose faith in anything they then said to me.

  6. Kenneth Hunter 26th June 2015 at 2:28 pm

    Are we not operating in a free market where customers can choose between which firms they want to work with. In other industries fees are charged for services and can differ significantly between companies, customers make the choice who they decide to work with, why are we constantly being scrutinised as a profession. We are not charities and i for one am sick and tired of being expected to operate like one i’m in business to earn money, i do that by giving sound financial advice operating within the regulations laid down by the FCA. When i retire which i hope wont be long i will then do my share of charity

    • Same as the reply to Marty really Kenneth, yes you can charge what you like but this is something I am told I have to get even though I don’t want it. I have done my own research and want to transfer my money but I’m not considered capable of making that decision without getting a £3,000 piece of paper from one of you guys.

      • I am in a similar position Martin, with a similar train of thought. If it wasn’t legislated, and only a choice to get Independent Financial Advice, I’m certain the charges would be far less !!!

      • @ Martin Cooke and Andy G
        I Appreciate where you are coming from but the last piece of DB transfer work I did represents 472 pages.

        If I could just give you 1 page which covered everything and that was accepted by the Regulator and my PI insurers then fine. But, the reality is that when you want someone to provide advice like this you are asking them to undertake a lot of work. The time spent doing this also prevents me from being able to see other clients and queries.

  7. Happy with what Marty Y says on the matter… assuming that there is a bigger excess for bigger pots transferred…

  8. I love the term recommended retail price. Something RDR didn’t pick up on.

  9. Kenneth Hunter 26th June 2015 at 2:33 pm

    posted before i had read anyone else s comments refreshing to read yours Marty Y, shame other IFA’s cant put their heads above the parapet and really express their feelings which they don’t seem to have a problem with when attending seminars and chewing the fat over coffee breaks and lunches

  10. I agree with Marty. By giving advice to clients with larger pots we are increasing the regulatory and insurance costs to the business and the obvious greater risk if a client were to complain in the future, which is typically why we would charge a percentage fee rather than a fixed fee. The client knows this at the outset and is free to consider other advisers fee models before deciding.

  11. Kenneth Hunter 26th June 2015 at 2:58 pm

    I empathise with you Martin unfortunately we advisers don’t make the rules we just have to abide by them and to be honest they are there to protect both you and I

    • I’m not being critical of IFA’S, just raising awareness that there is another side to this debate other than that faced by industry advisers. As the article points out there are inheritance and flexibility benefits to transferring out of many DB schemes and this is my compelling reason. I have more than enough income, funds and assets to last my lifetime, I just resent having to throw away £3,000.

  12. Martin, by thinking a fee of £3000 is just for a bit of paper, clearly highlights to you do not understand the process and risk ( for your IFA and you ) behind this type of work and that’s why the Government are insisting you take advice

    • Or, possibly, Martin does understand the risk and is one of the 5% or so who are good enough at numbers and risk, and comfortable in shouldering the risk, and resents paying more than a year’s grocery bills for what might be just a two page letter. And oh I forgot, in some cases the IFA will then hope and/or expect to get a further fee for placing the investments into their choice of funds.
      For a majority – the advice _might_ be necessary. For some of us it is more akin to mafia protection money.
      I know that some IFA services are valuable – I’ve just recently happily paid £3k to a mortgage advisor – but this area needs sorting out.

      • Just going through this process currently, this seems like a legalised scam to me, astonishing, and we wonder why people lack faith in the financial services industry, this should be fixed fee.

        • Donovan Goodman 5th May 2017 at 9:34 pm

          We live in a litigious society. This is what happens when we encourage the proliferation of ambulance chasing and PPI claims. If I was doing this business, I would charge a %. The bigger the case, the bigger the claim. As it happens, I will not get involved in this type of business as I firmly believe that the risks outweigh the benefits.

      • David, I can understand your perspective, but I would strongly contend it to be a flawed position.
        For a start, no pension transfer I’ve ever encountered was covered by a “two page letter”, and secondly, the letter is very much the tip of the iceberg; the hoops advisers must go through in order to ensure that all the bases are covered, that the advice is sound for their client, as well as having to meet the requirements of the FCA and their own compliance regime, is substantial and time consuming, with a great deal of research and evidence required on file, not to mention the knowledge involved to know what they are doing.
        When you go to a Barrister, Private Medical Practitioner, Solicitor, etc. you pay for their time, knowledge and expertise, as well as the inherent risks involved in their practice.
        You said you were happy to pay £3,000 for mortgage advice, yet typically, this type of advice is nowhere near as involved as a pension transfer. You were probably happy at £3,000 for this as your perception would have been that this was perhaps something you wanted, rather than something you needed, but didn’t want?

  13. Martin. no doubt when you claimed for your PPI , your claims firm would have charged you a percentage.

    As with any insurance, the higher the risk , the higher the premium, that is why IFA’s should charge percentages subject to a minimum

    • Mike, I never took out PPI so consequently I never had to claim for it. And your condescending attitude is probably why so many of your profession are so lowly regarded.

      I completely understand what I’m being asked to do, and I know exactly how much work is required as one of your fraternity have given me that information, (off the record of course). I also know why it is beneficial for me to transfer and that I don’t need somebody with a FCA certificate to confirm these benefits.

      • Martin if you wanted to build an extension and called a builder and the builder said ” you cant do that Martin because the extension would not pass planning or be safe in the long term , you may seek another builders opinion but if the answer was the same as the first … you wouldnt go build the extension yourself would you !!!! ”

        Please highlight to me why it is beneficial for you to transfer?
        Also why dont you get a FCA certificate yourself ? ( lack of experience/knowledge ) by the way What is an FCA certificate ?? please enlighten us all

        • Mike why do you keep using these dreadful analogies?

          I want to transfer MY money out of a scheme where my children will receive nothing if I die and has no flexibility with regard to drawdown, into a SIPP wrapper that allows me to pay off my mortgage, bequeath the funds to my daughters, and withdraw on a flexible basis depending on the path my life takes.

          I have been given an impressive transfer value but an awful ‘lump sum + annual pension’ figure. I have spoken to several people in the financial industry who all agree with my assessment of my position and I just wish to transfer MY money without spending £3,000 on a letter confirming my assessment. I would be very happy to sign a disclaimer document if such a thing existed, this is my responsibility and mine alone.

          • Marin, when you contribute to a FS scheme, you are buying a certain amount of income. Technically you dont have a monetary value, hence the word equivalent in the Cash Equivalent Transfer Value.
            You want to bequeath funds to your daughters, have you thought of a Whole of Life plan ?
            You may want to pay your mortgage off , but is withdrawing a chunk out of your pension the most tax efficient way of paying a mortgage off? have you thought of downsizing ??

          • Christopher Petrie 17th June 2017 at 7:15 am

            I totally understand Martin’s frustrations. And the IFAs response has been poor…his latest idea is Martin should consider moving to a smaller house! Mind you, when you use a pseudonym like Mike Hunt, I doubt any sense will prevail.

            The thing that worries me though is how some IFAs react to members of the public on open forums. People like Mr Hunt gives the impression we are arrogant know-it-alls.

  14. peter mulholland 26th June 2015 at 10:23 pm

    I sympathize with Martin
    I guess he has been around advisers in the past
    And frankly
    We don’t buy it! The comments that ‘we no better we do this for your own good’ don’t think so
    You run a transfer quote
    Then cut and paste paragraphs from compliance approved reasons why database
    Common guys this is a trade web site
    Not the Sun

  15. The regulator’s decision to restrict CETVs for immediate vesting to those advisers who hold an antiquated pension exam is against the spirit of the legislation and should be investigated by parliament.

    • Spot on Ken- we now sit on our hands waiting (and worse still so does the client) for a PTS who has more work than they can shake a stick at, to deal with something that we have been more than capable of dealing with up until 6th April!…and its only going to get worse 🙁

      • 20 years to pass G60 or AF3 and yet all you bothered to do was to get your golf handicap down. Pull the finger out and get qualified! 🙂

      • So Ian, on one hand you’re inferring you know what’s in the clients best interests, whilst bemoaning the cost and time taken for someone who has bothered to learn enough and pass the relevant exams to examine it?

        Yet you haven’t bothered to pass or have been unable to pass the exam yourself? Does that in itself not suggest that you do not have enough knowledge to assess whether it is, or is not in your clients best interests?

        For info, I write DB reports, I compliance check DB transfer recommendations and many advisers, even those with G60/AF3, still don’t actually understand why a DB scheme is potentially so advantageous.

        The trouble is many people like yourself, see a certain pot size and a certain income size, and their brain immediately says.. wow that’s a good ratio, lets go for it. When the reality is vastly more complicated.

        For info, we charge fixed fee’s for the report, which vary according to pot size, because of the risk, PI and compliance premium being all dependant on the size of the pension.

  16. A fee based on fund value seems best. Firstly, due to compliance costs and also that they are typically more complex.

  17. Its funny that given all of the legislative changes we have had since 2006, that the article still talks about G60 qualified advisers – a qualification based on Pre A-day! Surely we should be talking about AF3 by now – G60 has been obselete for years.

  18. @peter Mulholland. Hello again 🙂 It is much more complex than you describe. You may have spent time around the wrong advisers! Know your customer, suitability, advantages and disadvantages and full and transparent explanation of all risks and costs are more than just “cut and paste”

    But I stand by what I said on another thread, if a pension pot owner wants to do it themselves they should be entitled to do so. But the need for advice on DB and Safeguarded arrangements is a government requirement so you should address this with them

  19. I think there are two key points. Advisers are businesses in a market economy, they should be able to charge whatever they like. But at the same time consumers should never be obliged to take advice and there should be a clear and simple process for consumers to arrange transactions and take the risk for that transaction without any recourse to an adviser or provider.

  20. Nick Bamford & John Stimpson make the important points. As a rule of thumb DB schemes are going to provide better benefits than the CETV would in a DC scheme. However, the research and analysis to find out whether or not this ‘rule of thumb’ applies to an individuals own circumstances is lengthy and time consuming process. On top of that the added risk of this type of work increases the cost for clients, therefore, clients should not be obligated to pay for this work.

    @Martin Cooke I understand your frustration and agree with you that you shouldn’t have to pay for a service you don’t want. Unfortunately I can’t imagine that you are going to be able to find an adviser willing to take on this type of business risk for a price you feel happy to pay. Good luck, I hope I am wrong.

  21. G60 and AF3 exams are completely out of date and no use for an immediate vesting CETV. Instead advisers should be able to show a suitable level of intelligence by holding a PhD.

  22. We need to bear in mind FCA comments with regard to “contingency charging”. So if you charge £300 for a suitability report which advises the client not to proceed you probably won’t have covered your costs. The report/research etc will likely have taken the same or nearly the same amount of time as it would to recommend the client does transfer – but if the client does transfer you then take a further percentage (of the transfer value) on top? Surely, it is the research and report that takes the time – and is where the risk lies, not facilitating the transaction. Most qualified advisers in this area would be charging circa £200 per hour, so to charge £300 for a report suggests an adviser only spends an hour and a half on the research etc. The FCA guidance states: “If you charge on a contingency basis then this may give rise to a conflict of interest.You should recognise – and appropriately manage –any potential conflicts of interest”. The conflict being you will be paid a lot more to recommend a transfer than to recommend otherwise if you charge a small fee for the report and a larger amount for the transaction.

  23. Martin makes some good points and I feel that some of the responses reveal a certain insecurity among the advisory fraternity. I imagine that profits will be exponential once a critical amount of cases have been processed and a “model” created, but the client cost will remain constant. Perhaps IFA’s are aware of this and the fact that commercial pressure will force the fees downwards and are making hay while the sun shines.
    Martin is/was in a similar position to me as he implied that he was going to take a particular decision regardless of the advice (as he knew and understood the risks) but was required to pay (then) £3k for the box to be ticked. I understand the litigation risk aspect though and of course after PPI I can understand IFA’s not being too keen to rubber stamp a decision without proof of having gone through the hoops.
    My position is this: I need to withdraw 25% of a final salary or lose my house. With the funds secured, I can then spend a small amount to improve and sell the house, for around £50% more than I paid. I will then put back the 25% into the house. I have no choice. I would sign a disclaimer to the effect that I was aware of all of the risks. It therefore seems wrong that I should have to pay for advice that is of no use to me. In a way you could say that I am waiving my right to take any action in the future. Why can’t that option be open?

    if anyone want’s to offer me a sensible rate for a fund transfer of £130k for this purpose, please do let me know! I am currently being quoted £4.5k.

    Martin – if you still drop by, please let us know how you got on. The comments of some of the “professionals” here don’t reflect too well on the industry.

  24. *I of course meant to say in my message above that I would put the withdrawn 25% back into my pension and not my house

  25. I don’t mind paying a reasonable fee but as I already have an FAD and do simply want my DB scheme transferred to it would minimise the research & work any IFA would have to do. If anyone is happy to transfer a £120k pot for a 1% fee please let me know!

  26. I have been quoted £14k for a £400k transfer ,I think this is way too expensive so still looking.

    • That is not far off. I have just been quoted either £16,100 or £15,800 for £500k. Both solutions are outsourced to a PTS, and then the IFA takes over once invested into a SIPP wrapper. I think the point someone made earlier about the FCA limiting the action to a few. They should create a DB transfer qualification, so more can do it, which will drive down the price surely?

    • Ian, have you managed to find someone yet? If not please do let me know and i can put you in contact for a lot less than £14k!!!

  27. I have a £400k pot to transfer and been quoted a £14k fee ,I think that is completely obscene.

  28. Could I go to a fsa and tell them I want to transfer my £300k FS to a drawdown and that after 6 months I will withdraw all the money and stick it under my mattress. They can then charge me £50 to say it’s a silly idea but I will have taken the required advice and can then go ahead and transfer the money (but maybe not withdraw it and stick it under the mattress).

    • Christopher Petrie 17th June 2017 at 8:01 am

      No, because the FCA never give advice. They issue “guidance ” to IFAs, which in the event of a future dispute is routinely ignored by the Financial Ombudsman Service, a separate organisation.

      Hence the reason why you see reluctant clients for DB transfers meeting with equally reluctant IFAs, neither of whom want to give or receive the advice the government insists is given and taken.

  29. I have been charged 12k for a pension transfer value of£380k ,this seems steep but gives me options at 55

  30. Just beeen quoted £20k for £1.16m transfer. Told IFA where to go.

  31. I have a 900k DB transfer value from my ex employer. I’m struggling to find an IFA willing to give advice on whether to move my pot without charging the minimum £2k fee plus 1% of value.

    At over 39 times value being offered by my ex employer I’m struggling to see why the value and risk of the advice is worth paying £11k for.

    Surely the prospect of fees from managing the portfolio would ensure the IFA is not out of pocket.

  32. I’m in the same situation they have told me 6 percent over 3000 pound
    I don’t think this should be allowed to happen

  33. Being brutally honest and having read many of the comments, the simple fact is that even most advisers do not understand DB schemes, the chances of a “client” really understanding them is so tiny it’s scary, I’ve lost track of the discussions I’ve had with many very good advisers about DB schemes, where when I’ve explained some of the finer points, they’ve gone “oh, I didn’t know that”. That said, due to economic circumstances, DB transfers can be very attractive at the moment for many people, but likewise there are also many people (including many of those who insist they want to transfer) where actually it’s likely NOT to be in their best interests.

    The rules around them need a radical overhaul post Pension freedoms, but what virtually every client out there and many advisers seem to have forgotten is what the purpose of a pension actually is.

    Pension Freedoms, did not change that purpose (other than in some very specific circs), all pension freedoms did, was widen the options available and allow people to take on a lot more risks than they were previously allowed to.

    Whether this will be a prudent measure will not be known for at least 15 -20 years, but very, very few people I’ve spoken to, actually understand the risks they are taking on and the guarantee’s they are giving up.

    We do DB transfer advice and frequently make recommendations to transfer, but we also frequently recommend not transferring and in the vast majority of cases, clients want to ignore that advice not to transfer and do it anyway, that alone tends to suggest that even after we have carefully explained everything, they still don’t really understand what they are doing.

  34. It would seem form the replies form IFAs here that the fees charged more relate to arse covering than a reflection of the work involved. Pension freedom remains a fallacy.

  35. Despite the understandable attraction of transfer values around 40x pension, there are reasons for caution. IFAs point to the complexity of pension schemes and risk of giving up a guarantee, but fail to highlight that the greatest risk to transfer funds is the expenses levied.

    I have been quoted £6k upfront costs plus 1% annual charge, which cannot be avoided as the IFA is obliged to provide post transfer investment advice for my “benefit”. The “investments” to be enforced are equity based at a time of extreme overvaluation and do not match my need for a stable income in retirement.

    There are no controls on fees charged, over time these could easily absorb 30% of my fund, while poor investment performance in risk assets I do not want could easily remove another 30%. Investment managers are quick to take credit on good performance but will walk away when things go wrong.

    SIPP transaction charges and additional investment charges, such as bid/offer spread on unitised funds, may additionally be significant.

    Your transfer can easily become a feeding frenzy for fees and charges, under the guise of fabricated complexity and acting in your interests. I’d happily pay a reasonable flat rate transfer fee and move to cash, but this is not possible it seems.

  36. Anyone with a large transfer value might want to have a look at Interactive Investor, or iWeb (Halifax), if you want to manage your own pot of savings after transferring out.

    Costs are reasonably clear, and, all in, the platform charges (off the top of my head) are about £300 to set up and populate your SIPP, £200 pa whilst the money is left in, £300pa once you go into drawdown, and £300 at exit (whichever way you exit!). Hold whatever shares/funds/ETFs you like, eg from Vanguard. Costs are a bit more if you want to do a lot of active investing, but … if your IFA is telling you you need to cough up 1% pa or even 0.5% pa for their help, I would suggest you share a copy of the II (or iWeb) fees and charges.

    • I recently switched my own SIPP to Interactive Investor, as well as my ISA and my daughter’s JISA. I pay a single flat rate of £20 per quarter for all three accounts, and in return receive credit of two free trades worth £10 each, so the net cost is zero assuming one is likely to make at least two trades per quarter across the three accounts.

      Further trades cost £10 each plus the stamp duty for purchases, which reduces to £5 if you do more than 10 trades a quarter. Monthly investing costs £1.50 per trade.

      For the SIPP, there is an additional annual charge of £80 + VAT, so £96 p.a. This is a fixed rate, irrespective of the size of the portfolio. This compares favourably with say Trustnet Direct, which charges 0.25% capped at £200, never find the 1% charged by some IFAs.

      As a self-managing investor, the portfolio and charting tools at II are very useful, though I find Trustnet is better for comparing and contrasting equities, trusts and funds, and for tracking portfolio performance, allocations and statistics like Sharpe and Alpha figures.

  37. Are the fees you have to pay upfront or are they taken from the return on your investment
    After receiving the advice, if your invested pot brings in a return your happy with then the fees they charge should be acceptable

  38. Martin Martin 4th May 2017 at 5:32 pm

    Pay your adviser, or keep looking. If he’s a decent adviser, his fees will properly reflect the work that he’s doing for you. If he isn’t, why is he your adviser? It’s all about trust, so don’t ask for anyone’s opinion unless you trust them. It goes both ways and advisers have to be able to trust their clients too.

  39. Am about to try to transfer one of my pension pots having watched as my wife did hers a few years ago. Her pot (£50k) was dealt with at a 4% fee. This time the pot size is £600k – so the 4% fee of last time feels steep, very steep. A fixed fee of £5k fees right ? What say the professionals ?

    • On £600k you’d not want to be paying a fee for implemenation of more than £6k. I’d pay for the advice to include a full financial plan and lifetime cash flows and the TVA report mind you. Anyone offering that service for ‘free’ is baised towards recomednign a tranfer – that might not be in your best financial interests.

  40. Adrian Philips 18th July 2017 at 5:49 pm

    Oh dear! Whatever happened to the RDR, just proves we are nowhere nearer to being a decent profession than we were 15 years ago.

  41. A significant part of the blame must lie with the Government and its ‘one-size fits all’ approach.
    My wife wants to transfer a company plan to an existing self administered draw down pension.
    The transfer value is £140,800 (31/5/2017).
    The forecast pension is £5283pa.
    We are told that we must have advice from an FA.
    I’m not a FA but I am an accountant and I think that the average 10 year old, without a calculator, could work out that there is very little risk in the transfer.
    The Government and the pensions companies wish to protect themselves at the expense of individuals and as we are aware the free market does not always work, otherwise the cost of Financial Advice would be significantly lower.

    • …very little risk? This is exactly why people like you SHOULD be forced to get advice. You clearly have no idea what risks are involved in a DB transfer. You look at two numbers and think “bang tidy” that’s a decent transfer value without considering any of the myriad other factors? What incredibly ignorance!

  42. Our Professional Indemnity (PI) excess for DB transfers is £10,000. I suspect it is the same figure for most other IFAs. This reflects the fact that our insurer views final salary pension transfer advice as very high risk.

    Furthermore, an unscrupulous client has free access to the Financial Ombudsman (paid for by the financial services industry) which means that when they’ve blown their pot in 10 years time they can claim that the IFA didn’t advise them properly and if they can convince the Ombudsman on this point the IFA is on the hook for at least £10k and probably a lot more, especially if during the interim period his/her PI insurer has excluded claims for final salary pension advice!

    So members of the public. This is a hugely high risk area for advisers to operate in. Would you charge someone £2k for a bit of work if your PI excess for that work was £10k?

  43. £2,000 for a ‘rough & ready’ initial scheme assessment, review & comment on overall financial arrangements and two or three meetings to ensure the client absolutely understands the pros & cons of transferring-out versus remaining a scheme-member.

    THEN if (a) they can demonstrate that they (& their spouse) do understand, and (b) it looks likely that a transfer-out would be advisable, then the fee is a min £5,000 (inc the initial £2k) – this to include the full detailed scheme assessment, assessment of other non-DB pension provision, documented advice, the subsequent pension-provider and underlying investment recommendation as determined, in part, by a full needs analysis and cashflow projections. And a commitment by the client to sign-up to being a full financial planning client to ensure they don’t go and do something silly like encashing the investments and ‘investing’ in storage pods or the like. And that, in decumulation, they draw from the pot efficiently….assuming they need to….as other wealth may dictate it to be sensible to do otherwise or to delay.

    You’d be amazed at the number of ‘educated’ individuals (inc. ex-advisers, accountants, fund managers, FD’s etc) that, despite their initial firm assurances, clearly do NOT understand the ramifications of transferring-out. And equally don’t understand precisely what continued scheme-membership means for them, their spouse and family.

    The initial £2,000 deters the ‘tyre-kickers’.

    While the £5k is small price to pay for protecting yourself from your own innocent niavity and the financial detriment this could lead to.

    You pays yer money, you takes yer choice.

    But if you pay peanuts…

  44. Living the Dream Dream ..... 12th March 2018 at 11:01 pm

    Making people have to seek advice to transfer out of their DB scheme is, in my opinion, correct. However I believe there are a couple of flaws in this ‘tar all with the same brush’ approach.
    1. The maximum amount where an individual can transfer out without paying an adviser a fee is far to low,
    2. If you have been in the business for 30+ years and dealing in the pensions market, you should be able to conduct your own transfer, and yes I am talking about individuals who have retired and are now de-licenced.

  45. Kevin Jefferson 13th March 2018 at 4:38 pm

    David R – £3k to a mortgage advisor?

  46. Martyn, I agree that ‘Protected Rights’ transfers whereby ‘Advice’ is compulsory, ought to have a standard ‘menu’ of rates and then it is up to the adviser to decide whether to ‘discount’ or not depending on the complexity, value and expected time to be spent.

    I have to say that I have had prospective Clients whom just wanted a ‘cursory’ meeting because they knew exactly what it was that they wanted via their own research and then after a brief discussion realised that a) they had missed some important changes, b) their considered financial objectives ended up being different to their first thoughts and c) their tax planning knowledge was not up to date. I’m not saying that this is your situation but how would you know unless you took professional up to date advice?
    From the Trustees point of view, let’s say they acceded to your request and there was a major point that was missed and you ten went to FOS. FOS would say that the Trustees failed in their duty and would have to provide compensation.

  47. Andrew Macintyre 23rd March 2018 at 11:11 am

    The level of fees is being skewed by the supply and demand imbalance so it is not a competitive market. The regulatory requirement for advice, and the shortage of advisers qualified to advise on pension transfers is bound to lead to fees going up. The level of fee is one thing, but it is contingent fees that are a clear conflict of interest.

  48. The only fair fee is a percentage fee.
    Risk is asymetrical when considering pension transfer advice. The potential for a complaint is much greater where the transfer proceeds.
    Fixed fees with no adjustment for transfer size are poor business sense.

  49. Clearly we have now had the regulators update and new consultation paper.

    However the one observation I would make to most of those people making arguments on this thread both for and against is as follows.

    If the market were so “lucrative”, why is it that the vast majority of decent IFA’s do not bother to get the appropriate pension exams and even half of those that do, do not give advice on DB transfers?

    Why have large numbers of firms stopped providing advice on this area?

    Do I think the regulator tends to over complicate things? Probably..

    However the vast majority of people vastly underestimate their life expectancies and vastly over estimate the value of money now, vs money in the future.

  50. 9,000 charges on a 1million pension transfer is high but compared to 11,000 on 65,900 over 3 yrs much of which I was not informed of .along with high running costs have all but destroyed the pension

  51. with reference to DE Vere, my wife and I have found them to be most inefficient After 2 yrs of trying to move a db pot to a QROPS the DB trustees declined through time limitation rulings.losses 6k

  52. I’m aware of one firm that charges £10,000 . They completed over 300 transfers last year and unsurprisingly recorded record profits … could well be a record outlay for the FSCS ….

  53. Worth noting that SJP wont charge at all for a 1.31m CETV. There is a 3 year period with exit penalties ( though some drawdown is FOC) then after 3 years no penalty. 2% total charges per year (TER)

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