A bit of a left-field request this, but can anyone give me the benefit of their experience on what I should expect in the way of fees when setting up a draw-down pension fund? I’m transferring out of my company defined benefits scheme, having done all the necessary checks etc, but I’m having a last minute doubt over the level of fees that are being applied. My online research suggests that I could do much better, but all the various wealth management companies and IFAs out there make it very difficult to compare apples with apples and the only way I can be really sure is to go through an entirely fresh process with a new advisor. The problem with that is that I only have a limited window on a guaranteed transfer amount from my company scheme and I don’t want to risk a reduction in transfer value whilst I’m fannying about.

Everything I read suggests that most schemes reduce their fees on a sliding scale (i.e., the more you invest, the lower the fees), but none of them are very explicit up-front about what the fees are. I appreciate that any authorised advisors out there reading this will say that I have to get proper advice, but a ball-park indication of what’s within the bounds of ‘normal’ would be really useful. For the purpose of the exercise I’m having to assume that I’m looking at same fund performance from everyone, but that would of course have to be part of the overall decision.

To help with this I can say that I’m being offered charges at 1.15% each year on total funds, to cover platform and advisor charges, with an additional 0.41% annual fund managers fees on top of this. There is also an additional estimated 0.23% transaction fees each year. The sum involved is one that suggests I should be getting best rates out of most advisors that I’ve researched. There’s no up front fee, but I’m, instead, locked in for the first six years - that may tell you who the provider is if you know the market.

If their fees are in the ballpark reasonable area I may stay with it, if only because I really don’t have the time or inclination to go through the whole process again, but it would be good to understand if I might be able to do much better!

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I am paying my IFA 0.4% on my SIPP. There is also a Platform charge which starts at 0.25% for funds below £250,000 and can reduce to 0.1% for large funds. In addition here is the management fee for the underlying funds. For example some index trackers that require little active management can be as little as 0.1% ( one has to ask how fund managers can justify much larger fees for no better performance)
So your total costs could be 0.6% on a large fund ( say >£1m) invested in a tracker

What does your IFA actually do for his ongoing 0.4%??

Have a look at the Hargreaves Lansdown website. I'm not at the stage of drawing down, but my recollection is the they don't charge anything for setting up or running a SIPP in drawdown, there is just a valuation fee when required of £75 & VAT. Of course all providers have to make a living, so there are charges for holding funds which are a percentage of the value in the SIPP; for shares, bonds etc it is again a percentage of value but capped at £200 & VAT pa I think and no charge for cash. There are exit charges if you decide to go elsewhere once drawdown has started.

Unlike some providers their operating assumption is that clients are sentient beings that can manage their own affairs, and the quality of staff at HL is good. They might be a better choice for people who are happy to do their own thing and make their own investment choices than for those that want someone else to do that for them. They do provide financial advice if you want it, I have never used that as I regard it as expensive and prefer to do my own thing anyway. The website is good and easy to use and my experience of service has been positive. Only Range Rovers since 1988

dingg1 wrote:

What does your IFA actually do for his ongoing 0.4%??

I don't know if this is relevant but I have just been TUPEd across from one employer to another. The company pension scheme of the old one was Standard Life and the new company is AVIVA. I'm looking to transfer from old to new so rang them up and they said there is no fee to transfer but there are 2 figures; a total pot amount and an on the day value. Its this value that gets transferred, so to me its kind of a fee with it being less than the total amount, but for the actual transaction there would be no fee.

Steve.

martinf wrote:

dingg1 wrote:

What does your IFA actually do for his ongoing 0.4%??

The most important thing for me is to advise on choice of funds and to regularly review the funds I am invested in and to advise whether to hold or sell. They also provide an annual meeting to review and advise on my financial affairs, provide an online valuation updated daily on my mobile app, and will help whenever I need financial advice.
I am sure that others offer this at a similar price. This is just to give an idea of what is available at 0.4%pa

[quote="martinf"]

dingg1 wrote:

What does your IFA actually do for his ongoing 0.4%??

Ok, I’ll throw my hat in the ring. I am an IFA , been so for a long time. You are comparing apples and oranges with SIPP comparisons. You have to realise that DB transfers are one of the most risky areas of advice due to the nature of the transaction. Different companies have vastly different approaches and viewpoints over the advice.

At the end of the day, if you are happy with the proposition, then only you can make an informed choice. Advice is just that, advice! Regulatory reviews have been concerned that both clients and advisers can get blinded by some of the huge transfer values that have been exceptional over the last year or so. To take what are safeguarded benefits and then expose the whole fund to market is quite an undertaking as far as making sure it’s an appropriate thing to do. The majority of requests are actually declined.

As for where do I add value? Experience, research, review asset splits , allocation, some areas of advice benefit from ongoing review, but not all. Some clients prefer to be transactional.

It’s a wee bit like preventative maintenance on a Range Rover!

Thanks everyone for your thoughts and your professional views are much appreciated Mr Tee.

I realise of course that it's a big decision, but I've already jumped through all the hoops and assessed that it's the right thing to do. There are of course risks, but I have taken what I believe to be an informed choice that transferring out of the DB scheme is the right thing to do.

However, the one area i still don't feel well enough informed on is the subject of fees and I'm just trying to get an idea as to whether my current advisor is providing value for money in that area (and I appreciate that their actual track record and future performance is of course a key part of that). As I say, my research and indeed some of the response on here suggest that the fees I'm being quoted are other on the high side, but if your experience can tell me that my fees are within reasonable bounds then I will probably relax and go ahead.

I'm talking about a £1m+ transfer and looking at 0.9% platform/0.25% advisor fees = 1.15%. I will of course have fund manager fees (0.41%) and transaction changes (approx 0.23%) on top of that, but it's the 1.15% cost that troubles me. Everything I read suggests that this is way above the norm. Am i simply mistaken about this?

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I’ll ping you a pm

https://www.telegraph.co.uk/finance/person...folio.html

there's one way to save some fees

elbitrevnoc wrote:

There’s no up front fee, but I’m, instead, locked in for the first six years

This alone would make me avoid this provider/fund manager

In my experience most reputable firms will charge a fee for initially taking on your investment but then you're not locked in and can move elsewhere if they don't perform or otherwise annoy you!

If you're tied in for six years what are the penalties for moving elsewhere before the period expires as you could potentially lose quite a bit with a bit of poor advice or fund management and then just have to wait it out.

My wife and I have been consolidating all our various pensions and investments over the past couple of years and I'm currently paying around 1% annually. They're also doing a cracking job for us so I'm happy and counting the days to an early retirement as a result.

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1.15% just for providing a drawdown facility with fund management on top of that and locked in for 6 years would not attract me. On a £1m fund you are paying about £12,000 pa so £72,000 for the six years, it's certainly paying someone's pension, but Q if it is yours...

Looking at the Hargreaves Landsown fees the cost for £1m in funds comes to £2,500 pa, while £1m in shares and bonds would be £200 pa. You could pay for advice on where to invest as and when you need it. I have no connection with HL other than as a client. Only Range Rovers since 1988