Pensions

[Damo1176]

Hi people

Does anyone know what is normal of advice costs with pensions and how they are paid.

I am through Orange Genie and have setup a pension through contractorumbrella.

I am going to be putting approx £300 a month into the pension and he has said in the letter I received that the advice would cost £900!! Now I am completely naive when it comes to pensions but wondering where this £900 is coming from? I mean I might only be contracting for 6-9 months more.

Please someone help, its probably very easy to exaplin but they have not done a good job.

D

[minstrel]

Hi people

Does anyone know what is normal of advice costs with pensions and how they are paid.

I am through Orange Genie and have setup a pension through contractorumbrella.

I am going to be putting approx £300 a month into the pension and he has said in the letter I received that the advice would cost £900!! Now I am completely naive when it comes to pensions but wondering where this £900 is coming from? I mean I might only be contracting for 6-9 months more.

Please someone help, its probably very easy to exaplin but they have not done a good job.

D

What exactly does the letter actually say?

All this stuff is pretty heavily regulated by the Financial Services Authority (FSA) these days and most Financial Advisors have to give a detailed explaination on exactly how much they are getting in terms of commission for selling you the product.

Typically, the fee paid to the Financial Advisor would be paid by the pension company out of the annual charges. This £900 probably represents the total amount your Financial Advisor will be paid over the life of the pension. You won't be paying anything more than the 1% or 2% annual fee that you should have been told about when they sold you the pension.

Alternatively, Financial Advisors can charge you a fixed upfront fee for their advice. However, if they were going to charge you £900 then they should have made this clear to you in writing before you signed up to anything.

Does the letter actually ask you to send the Financial Advisor a cheque for £900 or is it just making you aware that they will be receiving £900 from the pension company?

[Damo1176]

It says on the 3rd page how much the advice will cost...

For arranging this policy we will pay commission to Contractor Financials Ltd as follows:

£900 at the start of the contract

The amount depends on the size of your contribution and the length of the policy term It will be paid for out of the deductions.

Under Further Information it states a charge of 1% is deducted from the value of the reg. contribution fund each year which is reflected in the pricing of the units in the unit linked funds.

Just trying to confirm in my head as my advisor has not got back to me yet who pays that £900, there's no cheque to be sent from the letter.

[mjshrimpton]

not you

Just trying to confirm in my head as my advisor has not got back to me yet who pays that £900, there's no cheque to be sent from the letter.

It is paid by the pension provider to the IFA. Nowt to do with you.

[Swiss Tony]

It sounds like you have gotten an IFA who does not seem to be 100% honest.

The FSA states that they have to make clear exactly how they are getting paid and how that effects you.

I work as a Financial Consultant and from what this looks like the comission will be comming from the company that they have placed your pension with, and it starts as soon as you have made your first payment. This is a common practice in the industry, but you should have had it explained in full. You should also have the choice of paying for the IFA's time if you feel that the comission is too high.

PM me if you have any other queries.

Hope this helps

[spiderlover]

It is paid by the pension provider to the IFA. Nowt to do with you.

Having been an IFA for 11 years I think I should put this straight...

Whenever you buy a product from an IFA, YOU pay for the advice. Even if the payment to the IFA is a commission from the provider, if is paid by YOU out of the deductions. Since hard disclosure was introduced in 1994, the amounts of commission paid to the adviser had to be stated in the Key Features Document. This legislation was introduced by the PIA (predecessor to the FSA) to ensure that advisers were less inclined to recommend products based on the amount of commission paid.

Many IFAs are now moving over to fee based advice. This is partly to ensure that there are no nasty surprises when you see the reduction in yield on an investment due to the commission paid, and also to increase the perception of professionalism in the industry: We pay for legal advice on an hourly basis - why not pay for financial advice in the same way?

Presuming you are looking at setting up a Stakeholder Pension, the commission payable to an adviser is restricted to 1% anyway which is another reason why many IFAs would look to charge a fee.

The fee needs to be agreed before the advice is given and a "reason why" or recommendatin letter is produced.

Hope that helps. I can give some basic guidance on financial issues on here but as I am no longer an RI (registered individual) with the FSA I can't give actual advice....sorry!

[mjshrimpton]

"Whenever you buy a product from an IFA, YOU pay for the advice. Even if the payment to the IFA is a commission from the provider, if is paid by YOU out of the deductions. "

Obviously you are right. I was just trying to make the point he did not personally have to write a cheque for £900 as part of the process.

[glashIFA@Paramount]

It says on the 3rd page how much the advice will cost...

For arranging this policy we will pay commission to Contractor Financials Ltd as follows:

£900 at the start of the contract

The amount depends on the size of your contribution and the length of the policy term It will be paid for out of the deductions.

Under Further Information it states a charge of 1% is deducted from the value of the reg. contribution fund each year which is reflected in the pricing of the units in the unit linked funds.

Just trying to confirm in my head as my advisor has not got back to me yet who pays that £900, there's no cheque to be sent from the letter.

A lot of money for filling in an application form i agree. However, out of that i would imagine that the IFA would have to pay for FSCS (Financial Services Compensation Scheme), FSA (Financial Services Authority) Public Indemnity and Public Liability cover, probably premises, no doubt research tools and systems as well as various other costs associated with trading as an IFA.

In addition, you need to establish what else you get along with the initial meeting / application form. i offer my clients an annual financial "healthcheck" if they want it with me visiting them as well as being available for any queries relating to their finances that i can help them with on an ongoing basis. i normally travel to meet them at their convenience and i don't charge for this.

I'm interested in keeping clients for life rather than a quick sale then never see them again. It certainly easier to retain existing clients than to be constantly seeking new ones as I'm sure you're all aware.

i do offer the clients the option of paying by fee instead if they want. However, if they choose this option then it's fee for everything. Fee for dealing with enquiries, fee for subsequent visits, reviews etc. One or the other, and i really don't mind - nor should any worthwhile IFA.

[Damo1176]

He has now confirmed this is paid by the pension group i.e. Scottish Life, they pay him the money to manage it for them. Between he and I we can make decisions on where to put my money in funds etc.

"this is not paid through your fund or personally. 100% of your contributions are invested in the scheme from day one and no set-up costs or fee's need to be paid.

The commission figure quoted is paid to us by the insurance company (Scottish Life) and is based on a assumption of monthly amount and term of contract. in essence It pays the bills for us and covers the costs of administering the scheme.

"

[hyperD]

What should I be looking for when an IFA is offering updated products on an increasingly regular basis on the premise that the pension laws are changing constantly and there are new mortgage packages being offered?

What I'm really trying to say is this: are they using the changing pace of laws to increase their commision through the introduction of more products?