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Just wanted a quick sanity check from any financial advisers out there. Wondering if this is 'the oldest trick in the book', or standard practice (I think the former).
Had my pension adviser over last week to discuss my plan, because I wanted to up my monthly contributions by a significant amount. He's not independent, rather an adviser for a large wealth management company.
We chatted for about an hour, and got on pretty well. I asked him if I could set up an on-line account. He said yes, and went on to describe how my pension accounts would look on the screen. I queried why there would be 'accounts', and not just one account, and he said it would make sense to have a new pension set up in parallel with the first, so I could keep track of how each was performing. I said this seemed strange, as both would be invested in the same fund, but he basically said it would help me keep better track of my money, and brushed it off.
I've just got the paperwork through now for the pension, with all the jargon, and legal risk awareness stuff, and it turns out there's a 4.5% p.a. advice fee for all contributions made in the first 5 years, amounting to a few thousand pounds, which pays for the initial advice. I have already had my original pension for more than 5 years.
I think I know the answer to this, but I'm being stitched up like a kipper, aren't I?
I'm not an advisor, but I've had plenty of pension plans, and that sounds like a complete rip-off.
I would stop having anything to do with these people.
He's on commission,there's no commission on just increasing your contribution,he needs it to be seen as a new sale so he can make money,or the short answer is yes.
That's pretty unethical, isn't it.
Is it actually illegal to mis-sell something so deliberately?
I'm feeling pretty gutted about this, he has been our mortgage adviser for 13 years, and someone I thought I trusted. Grrr
I think there's some sense in having different pension pots, especially now you have more options for taking cash, draw down, annuities etc. at different ages.
But yeah, that sounds like a rip off. I'd be on the phone to the company to ask.
Yes, boot his balls on the way out.
And how much is the ongoing charge after the 1st 5 years?
If you know where you want to put the money (though just one fund is daft!), can you not do it with Hargeaves Lansdowne, Charles Stanley , etc?
Apologies Reuben, the pension isn't one fund, it's in a 'managed funds portfolio' made up of 7 different funds, but both pensions would have the same % invested in those 7 funds, so essentially identical, just different monthly payment amounts.
I am not that savvy with investments. Think I'll go and check out those companies you mentioned. Cheers
Check out AJ Bell YouInvest too. Other people will have further advice. Typical charges for a SIPP are 0.25% - 0.45% pa plus the fund charges. Due to buying in bulk they can usually eliminate entry and exit charges (Often 5%) sometimes paid by retail investors.
Did your advisor mention these?
And how much is the ongoing charge after the 1st 5 years?
The small print on charges...
"The charge for our initial advice is 4.5% of the amount you invest in the first five years and for on-going advice 3% of each contribution you make after the initial advice has been paid for and an annual charge of 0.25% a year. The charges for the product are 1.5% for the amount you invest in the first five years plus 3% of each contribution you make after the initial advice has been paid for and an annual charge of 1% a year which will in effect be waived for the first six years that each contribution is invested".
When I asked about the charges, he said it was 1.6%p.a that comes straight out of the pot.
Did your advisor mention these?
No, he didn't mention exit fees at all.
Ooh yes, regulated complaints 🙂 write to the chief executive direct asking for full preview of all investments because you think you have been missold one or multiple products. Then go to the ombudsman if not happy with response
No, he didn't mention exit fees at all.
They may not be payable...
If you go to https://www.charles-stanley-direct.co.uk/Our_Services/ f'rinstance you can check your funds' charges if, as they probably are, dealt with by CS.
If you search for your fund in the "search" box you may end up with a screen like this:
Click on the "Documents" tab and you will see a "Key Investor Information Document" box.
Click it and read the charges for that fund.
These are in addition to your wealth manager's fees. Some have entrance charges, some have exit charges, and some have performance fees, but they all have an annual ongoing fee. The big brokers can cut a deal with the fund managers, removing most of these. Investing can get expensive with the wrong manager. It's not St James is it?
If you want some top class opinions, of which one, unlike here, might be right, go to
http://forums.moneysavingexpert.com/forumdisplay.php?f=17
There are exit fees in the documentation, so I am aware of them now (6%, decreasing by 1% each year until 0%). He didn't mention them when I met him though.
It's not St James is it?
😉
Why do you ask?
They're one of the more expensive wealth managers, to be polite...
Is there a "free" cancellation period ?
Thanks for the heads up on St. James SR, I just bailed out on them having signed up but getting cold feet in the cooling off period. It's a minefield out there and you know it's going to go the same way as endowment mortgages and PPI.
Bollox, my pension pot is with st James. May have to review that I think. Wish it was easier to sort this pension lark out, bloody minefield it is!
You are paying 6% pa for ever on those numbers you have given us! Why can't you just increase monthly contributions on the original fund, or are you paying 6% on that too?
Just open your own account and invest into the same funds e.g. with hl.co.uk etc
You are paying 6% pa for ever on those numbers you have given us! Why can't you just increase monthly contributions on the original fund, or are you paying 6% on that too?
I wanted to just add to the original pot, but he said it would be better to do a new one!! Sad thing is, I have only just realised but yes, I've been paying these charges for the last 7 years on the original pension.
It's crazy isn't it. He told me when I met him that the charges were 1.5% p.a., on the pot (but it turns out this is just the product charges).
I have just looked at the projections...
My additional contribution is £1200 pm, so for a retirement at 67 (315 months), I will have contributed £378,000, just from this extra payment.
The projections show that increase at the 'lower rate' would yield £204,000 (a loss of £174,000)
Even at the 'mid rate', I would stand to lose £70,000 of my pot.
And this is from one of the biggest pension providers in the country!
Went to a pensions adviser here in the snooty Ribble Valley and they wanted £2000 just to sign us up!
There is a genuine problem with financial advice in that good advice from a skilled adviser costs money and people don't want to pay up front for that, hence the murky world of kickbacks on financial products....
I think I might just have to start paying up front for some of that advice.
I've just signed up for an account with HL (cheers Footflaps). I'll look into it over the next week and see what I can set up / transfer.
From what I can tell, the funds there generally have 0 - 1% start up fee and typically <1% on-going charges, which seem much fairer.
I feel like a right muppet.
Cheers folks 🙂
I think I might just have to start paying up front for some of that advice.
Maybe. There is a growing trend towards IFAs making a one off charge for advice, rather than an ongoing percentage.
The next stage might be to see whether your Wealth Manager's selections have been doing the business, and look like they may continue to do so. They're not necessarily the same thing!
I'm also looking at a new pension fund right now, talking to an advisor from SJP
Actually the advisor works as an agent for something for someone else, so 2 steps removed from them! Presumably everyone takes a cut.
They've offered me 1.8% p.a. on the whole value of the fund. That's tied in for 6 years, if we pull out in that time there are exit fees. After that I think the exit fees are zero, although from reading the above I need to check!
Although it's less than what people are saying above, it's still higher than hl and others out there. Does anyone know if it's feasible to negotiate this?
Also it still really depends on how their particular fund performs, and obviously they'll say theirs are better than everyone else. They've shown us graphs which are after deducting the fees, average growth over 10 years of 5% p.a. is that good? Most of that is pre-eu ref though, since then it's been all over the place, and overall no growth in the last year
That's a rip off, I'm an independent wealth manager and have helped a few folk on here.
Give me a call tomorrow and I can give you some pointers and possible options. If it is St James Place they are expensive and can only advise on their own products. Number is 0794977nineninetwofour
Alan
St James Place are ridiculously expensive but pull a lot of people in because their 'advisers' are incredibly good sales people. What he was suggesting does sound somewhat devious and I would investigate his rationale for suggesting a new plan further. Hargreaves et al are excellent if you're happy you know what you're doing from an asset allocation point of view and you're comfortable understanding broad market movements. There are firms in between which have grown from traditional stockbroking businesses who can provide advice on the investments if that is something you are more comfortable with. As someone who works at one of the traditional broking businesses that is now very much investment management we see a lot of Hargreaves etc clients who have been lured in by their own temptation into taking too much risk and paid the consequences.
So, Hargreaves are good but don't ignore the option of advice if choosing your own investments is not something you are comfortable doing. On a fund based structure given the typically low turnover it really doesn't cost much more to go with an advisory investment manager these days given the relatively recent changes to the Hargreaves charging structure.
average growth over 10 years of 5% pa
Their funds are no better than anyone else's, partly because they largely repackage existing fund managers vehicles ie Woodford manages several billion for them. Their charging structure is more likely to create a drag on performance.
average growth over 10 years of 5% pa
I'd be pretty disappointed with that, but I'd be even more disappointed with nowt over the last year. We had the Chinese wobble this time last year, but since Christmas it's been pretty damn good!
St James have some smart and well qualified "partners", I know a few who have moved to work for them from other areas of finance.
OP I am rather surprised at the large losses in the low growth scenario, are you sure the calc is correct ?
FWIW have a look at Standard Life too
If you are not happy with current provider you can transfer elsewhere, again look at fees. As above I think a letter to CEO is worthwhile re the tactics employed
A 50% ish return over 5 years taking their advice. Yet if you had invested directly in St James Place shares 10 years ago you would roughly have tripled your money.
They're doing alright.
And OP
Are you maxing out yours and the better half's ISA allowances ?
There's an argument that you should... rather than pouring all your savings into pensions
Im with SJP and have been meaning to move it for ages.... your thread has reminded me ... ta
Good luck
[i]There's an argument that you should... rather than pouring all your savings into pensions[/i]
Ok, but a question: as a Director of a Limited business I can get the business to 'invest' money straight into my private pension (saving tax, NI, corp tax etc), but wouldn't money into an ISA have to go in from my net?
Ok, but a question: as a Director of a Limited busines...
That's the position I am in too. It's hard to see past anything but a pension, with all contributions coming through the company rather than from my salary. That's always put me off any kind of ISA or personal savings.
Ok, but a question: as a Director of a Limited business I can get the business to 'invest' money straight into my private pension (saving tax, NI, corp tax etc), but wouldn't money into an ISA have to go in from my net?
Yes, but you can't access your pension until you're 55. You can call on your ISA at any time should you need to, totally tax free.
The govt is unlikely to monkey about with ISAs, but they seem to move the Pension goalposts willy nilly.
As usual, diversity is the key.
More tax efficient putting money into a Pension.
More tax efficient taking money out of an ISA
Swings and roundabouts
Build up the ISA balance so that once retired you got a decent amount you can invest into income generating products, to then be able to have that income tax free ..... as opposed to having to pay tax on pension income (after personal allowances etc)
On the SJP thing - currently having a review with the chap recommended on STW (5th post in this thread - Simon Kearsley) who's linked to SJP. Follow up session next week so will check out their fees, but seemed reasonable when we first chatted a few weeks back (around the 1% ish)...
http://singletrackmag.com/forum/topic/financial-adviser-recommendations-manchester
Had a meeting a few months ago with my financial adviser/personal bank manager.
Came out feeling i'd been talking to a used car salesman.The guy did not have a clue about investments.Turns out he later left to pursue a career well outside banking.
It was probably the push i needed to look at self investing and thats what i've done.
More tax efficient putting money into a Pension.
Definitely, if you're a higher rate tax payer:
1) You get 40% back on the contributions which means you're investing out of your gross income into the pension
2) At 55 (depends on your age) you can take 25% tax free
3) The pension itself will be taxed, but as it's likely to pay out less than you originally earned, you'll be paying less higher rate tax
The only complication is once your total pension pot gets to £1m the tax rate jumps up, so it gets more complex.....
The only concrete advice an advisor can give is how to efficiently save.
Picking funds is no different to playing Roulette, you cannot guarantee you'll pick a winner, so you spread the risk and pick a range of fund managers with a good track record. Although, at the end of the day, they can still cock up and the funds under-perform.
Ok, but a question: as a Director of a Limited business I can get the business to 'invest' money straight into my private pension (saving tax, NI, corp tax etc), but wouldn't money into an ISA have to go in from my net?
Yes, but as noted above, Pensions are taxed on the way out, and have restrictions on when you can get at them. If you're a higher rate tax payer, now is probably a good time to be making pension rather than ISA contributions: the changes to how dividends are taxed have come into force, but CT rates are scheduled to come down in the future.
Ok, but a question: as a Director of a Limited business I can get the business to 'invest' money straight into my private pension (saving tax, NI, corp tax etc),
Don't need to be a Director for that. It's called Salary Sacrifice Pension, which we use at work. The company pay into our pension directly and then pay us our salary less the gross pension contribution. Saves the company employer NI etc on the pension contribution, which they then pay into our pension for us, so the overall cost to the company is the same, but we get the employer's NI % uplift.
I know one guy here locally who is with St. James. Nice enough guy but lordy wouldn't trust him with a sweetie stall. Commission led products sales, rather than advice, is what he's at. Drives a Porsche and a FO Range Rover, wife has a Q7. Kind of a good advert for how well he does..
To follow up on my OP, I spoke to the adviser, and he seemed to understand all of my concerns, especially given the wording in the keyfacts.
He explained that the projections that looked poor are largely down to new regulator requirements for illustrations. They have to take into account inflation at 2.5%, and assume growth of -0.5% for the 'lower rate' figure, 2.5% for the 'mid rate' and '5.5%' for the 'higher rate'. So, the quoted values reflect the future equivalent values. Makes for depressing reading.
He said that it is not possible to increase monthly payments on the in-house software, and a new account [i]had[/i] to be opened, but this was not classed as a new account for calculation of charges, and would in effect work exactly as if I had just increased my instalments. There was no way around this.
Finally, he explained the charges were an annual charge at 0.25% for the pot value, plus 3% of each contribution as paid, equating to around 1.6% p.a. over the life of the plan.
My main reassurance was that the additional instalments will be on exactly the same terms as my original plan, which is currently worth £57k after 80 monthly payments of £500. I am not sure if my calculations are correct, but I make that an average return of 9% p.a., which seems ok to me.
I am sure I could get better value going elsewhere, but at least I'm not as panicked as I was last night. Thanks for the advice, all.
He explained that the projections that looked poor are largely down to new regulator requirements for illustrations
He is correct.
He said that it is not possible to increase monthly payments on the in-house software, and a new account had to be opened, but this was not classed as a new account for calculation of charges, and would in effect work exactly as if I had just increased my instalments. There was no way around this.
That I simply don't believe. It would be about the only pension system in the UK that didn't allow for contributions to change on the fly.
I am sure I could get better value going elsewhere,
Just about anywhere in fact.....
My main reassurance was that the additional instalments will be on exactly the same terms as my original plan, which is currently worth £57k after 80 monthly payments of £500. I am not sure if my calculations are correct, but I make that an average return of 9% p.a., which seems ok to me.
Does this take account of your tax "refund" and employers contribution?
Finally, he explained the charges were an annual charge at 0.25% for the pot value, plus 3% of each contribution as paid, equating to around 1.6% p.a. over the life of the plan.
With HL, etc each new investment will cost you about £10, or less if a regular payment. It mounts up...
Loads of tables / info on SIPP costs in Telegraph finance section....
[img] 
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As a general rule, any pension company with Reps driving round in posh cars selling you commission based products is going to be more expensive than a SIPP. HL is more expensive as SIPPs go, but their online tools are excellent.....
Take the opportunity to move to a different provider, now. SJP's rates are unbelievably high, they prey on people's ignorance of pensions, can't demonstrate any added value for what they charge and they will have cost you a fortune by the time you retire. It is literally the difference between receiving an adequate pension and being happy in retirement, or not having enough to get by and living with the certain knowledge that you paid for those greedy price-gouging baskets to drive RRovers.
Ok, i may as well put my hand up here. I am pretty ignorant with pensions and am exactly the guy you have described mile_p. I have just signed on the dotted line with SJP.
In all honestly never once did i feel i was getting a hard sell. But this thread has really got me thinking.
So i am 4 months in at £500 a month through a limited company so fairly tax efficient.
Do i stay or bail with the full exit fees attached and try and find a better deal now. I will NEVER be much better informed about pensions which is why i will hppily pay for [u]good[/u] advice
Machtheknife, that's the position I was in 80 months ago, so I've paid in £40,000 and its now worth £57,000. just as a guide.
I'm really confused now, because I just had a chat with the group finance director where I am contracting. Very switched on guy, and he has had the same pension as me with SJP, since '92. he is really please with it, and says it has been worth every penny, compared with having to manage a SIPP. He also confirmed that it's true that they can't just increase monthly instalments on existing accounts, but have to add it as an extra account. This however doesn't incur any additional fees normally associated with new plans.
Lots of conflicting opinions on this, the more I dig.
Marking to re-read later
Hey ormancheep, the whole subject pickles my head TBH, I'm not a complete nugget but financial advice ill happily pay for if it not only saves me money but makes me money. That's a no brainier so opening and taking care of a SIPP would not work for me and i am very well aware of that. BUT the problem is finding someone who has the expertise to invest your money for you over a long period of time and not rip you off. I think I'll stick this out for a couple of years and see how it progresses. I'm still putting a load into a Stocks and Shares ISA and I have property as well so I'm not throwing everything into one basket.
1) You get 40% back on the contributions which means you're investing out of your gross income into the pension
2) At 55 (depends on your age) you can take 25% tax free
3) The pension itself will be taxed, but as it's likely to pay out less than you originally earned, you'll be paying less higher rate tax
Id always assumed there's then nothing to stop you putting your lump sum into ISAs (limit is now 20k pa) over a number of years as a way to get tax free income from part of your pension.
Machtheknife, that's the position I was in 80 months ago, so I've paid in £40,000 and its now worth £57,000. just as a guide.
To see if that's good or bad, you need to have a look at the main market indices over that period for wherever you invested your money.
Looking over 1-2 years is pretty meaningless with pensions, as in the 30+ years it will be invested there will be several crashes and several bull runs in the markets...
Yes I would rerun the contributions and divi payments over the investment timescale, say at ftse 100 levels. The difference v what they achieved is whether they provided good value.
I have a mixture of pension products, Diversification really is the key. I don't study their performance too closely but my managed funds don't seem to do anything, my own investments in btl beats all the others hands down.
Be aware you pay these fees irrespective of performance
Also worth doing you analysis in $ as post Brexit the £ has devalued 15% which makes overseas funds look 15% better, when in actual fact your purchasing power hasn't really changed....
Also worth doing you analysis in $ as post Brexit the £ has devalued 15% which makes overseas funds look 15% better, when in actual fact your purchasing power hasn't really changed....
How did you work that out?
How did you work that out?
See that jump around the date of Brexit in this US based fund priced in GBP...
That's not the fund gaining 10%, it's the £ falling 10%...
So the £ devaluation makes you seem 10%-15% better off, until you try and buy something imported, like an iPhone, which costs the same in $, but is now 10-15% more in £...
Long term (as inventories run down), more and more UK prices will adjust upwards as we're a net importer and so the devaluation will get passed on to the consumer. Immediately post Brexit, if you cashed in your overseas stocks and bought imported products ex stock from UK suppliers you could have realised a 'real' gain.
[url= https://c1.staticflickr.com/9/8842/29566083552_187c8c2bef.jp g" target="_blank">https://c1.staticflickr.com/9/8842/29566083552_187c8c2bef.jp g"/> [/img][/url][url= https://flic.kr/p/M3DUzf ]Untitled[/url] by [url= https://www.flickr.com/photos/brf/ ]Ben Freeman[/url], on Flickr
NB Once we finally enact Article 50, I'd expect to see another 10-20% devaluation....
So the £ devaluation makes you seem 10%-15% better off, until you try and buy something imported, like an iPhone, which costs the same in $, but is now 10-15% more in £.
Hmmmm kind of
He'd be worst off if he didn't have any USD exposure though wouldn't he ?
And he's better off than those that don't have any usd exposure.... and on the basis that all we really wanna be doing is beating the bloke next door or some fella on the interweb ... He is in fact better off
*Bookmarked for later*
As desperate to start a pension, and as a Ltd Co. Director, I need to get (Any) advice..
He'd be worst off if he didn't have any USD exposure though wouldn't he ?
That's not my point.
My point is that if you look at your statement and see a 15% rise in the last few months, that's not your brilliant advisor / fund, it's just an artefact of the devaluation. So, when working out if your funds are beating the market you need to account for the devaluation. After all, you'd have got the same kick if it was just sat in a 0% interest US savings account, but that wouldn't be a good investment choice long term.
NB I moved one of my SIPPs into 100% US funds two weeks before Brexit, with the intention of buying back into £ when the £/USD hits parity, but as we're delaying Article 50, I'm still waiting....
My point is that if you look at your statement and see a 15% rise in the last few months, that's not your brilliant advisor / fund, it's just an artefact of the devaluation.
Yes you're quite right ... not sure that was clear previously.
What the OP has to question then is, would he himself or another adviser have been clever enough to have overseas exposure in the first place (you'd hope so)
and
Parity for USD/GBP 8O.... a 25% devolution from these depressed levels... not so sure about that.
My point is that if you look at your statement and see a 15% rise in the last few months, that's not your brilliant advisor / fund, it's just an artefact of the devaluation.
That's clearer. Though it could be argued that foreign funds are being held as a specific play on the squid.
If you get a contact from an Mr A M from a firm in Glasgow, then do what he suggests.
He's a quiet member on here, looks out for questions on pensions, an avid cyclist, an all round good bloke and has saved me a fortune on my pensions. If you put your email address in your profile it might help.