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Old 30th Sep 2013, 13:24   #1
Bossk128
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Pension question: IFA fees?

TLDR: Do I need an IFA to manage my pension with an 'off the shelf' pension scheme, or can I do it myself and avoid his fees?

Quick question for those who have an independent personal pension:

my employer has recently started doing a pension with a matched 1% (woo hoo!). It's a small company, so it's not their own scheme but something selected by the company's independant financial advisor from another provider (Scottish Life). However the fees are quite expensive as far as I can tell.

1: First year 20% of your total payments to the independent financial advisor
2: Ongoing 3.50 per month to the IFA
3: If your pension deposits go up (i.e. you get a payrise, or you choose to increase your %) the IFA gets 20% of the increase
4: there is an ongoing charge from the pension company (in this case 0.9%).


All my previous pensions have been with the bigger company schemes, so these charges were pretty much hidden from me (and the larger matched % offset any fees).

Having looked at the Scottish Life scheme on MSE etc I can see the 0.9% fee and understand that is what they charge, but is there anything stopping me from taking a policy out with them directly? Do I need to do much? Can I do that and avoid all the IFA fees?

I understand how pensions work, but I have no interest in learning the intricacies of which funds to use.

Cheers for your advice!

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Old 30th Sep 2013, 13:39   #2
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Sounds like a GPPP and by skipping the IFA, you will probably lose the free money from the employer.

Employer has little interest in reducing the charges you pay so they probably haven't found anything too competitive. On the other hand, with such small contributions the IFA has to make his money somehow and so fees as a % will always look a little large.

If you earn an 20k-30k, the IFA is only going to get 8-12 a head on percentage, plus 42 fixed. Unless you have squillions of employees signing up to the pension, that isn't a whole heap of money to run a business with.

If you do want to go direct, try http://www.cavendishonline.co.uk/pen...onal-pensions/
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Old 30th Sep 2013, 13:43   #3
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20% seems a tad steep, but remember that group pensions work for an adviser (especially a small one or a directly authorised one) can be extremely risky for them and being found to have given bad advice would ruin them. Also, bear in mind that forthcoming capital adequacy requirements for advisers mean that they'll need to keep more money readily available should something go **** up.

You could theoretically go direct and save yourself the fees, but you'd need to exercise some due diligence on the investments you hold within a SIPP as well as ensuring you claim back your income tax paid on contributions you make. You should be covered by the FCA should the scheme or the funds held go belly up (unlikely that Scottish Life will go under, but some of the more esoteric funds and investment products like Keydata have done and been horrific with reimbursements as low as 10p in the 1).

If it were me, I would go it alone simply because I am qualified as an IFA and only lack an SPS to work as one (but perhaps more realistically, who would hire a 23 year-old IFA?). There are some great mainstream funds to choose from out there that will deliver good enough returns over the long run without placing your savings at more risk than is necessary.

That being said, if the IFA is a good one (i.e. not a member of one of the more questionable IFA networks) you could probably save a packet by going to him or her directly, where they'd be more likely to charge you anywhere between 0.5-1% ongoing for the assets under advice.
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Old 30th Sep 2013, 15:54   #4
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Thanks for the help guys. It is a GPPP, and I do know that if I want the 1% I need to stay in that pension scheme. What I'm trying to figure out is if it's worth putting how much I want to save into this pension scheme, or run two in parallel, this at 1% and another at a higher rate. If the prices were fixed tiered or capped maybe I'd go for it all in here, but as it scales I'm concerned I'd be paying too much.

I guess I'm questioning the value for money of the IFA: if it is a GPPP is there anything the IFA does, and is it managed by Scottich Life, or do you think my the IFA has an active hand in managing the pension pot?

I've been without a pension for 2 years so feel I need to catch up a bit, I don't want to be adding top up money for it to be siphoned off all the time.


The comment about going it alone is interesting, but I don't know why he would charge me less if I went directly? If he sets his own fees (rather than my company setting his fees) why would he want to lower the fees?

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Old 30th Sep 2013, 15:59   #5
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20% of the first years premiums you mean? That's a pretty standard, and infact very reasonable set up fee.

Scottish Life can be only be accessed through Advisers. I've got to say, they are IMO the best in the market for this type of scheme. I've recommended loads recently, they're just impossible to beat, check out the reams of awards they've won lately.

I will write more on this but I have to catch train!

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Old 30th Sep 2013, 18:34   #6
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If it were me, I would put the maximum necessary in to get the maximum employer contribution. Anything above that, I would put in S&S ISA or personal pension depending on tax status and goals.

You can access Scottish Life through Cavendish and not have to pay the IFA 20% fee (you do have to pay an initial fee but then it's just the AMC after that).
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Old 30th Sep 2013, 18:48   #7
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The 20% is an initial fee.

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Old 30th Sep 2013, 20:43   #8
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The short answer is no, you can go and get a Stakeholder Pensions with an annual charge of 1% from a few well know providers. You will probably get a default managed fund which will move the assets from volatile shares to through bonds and into cash gradually as you get towards retirement.

An Adviser may charge you a set you up fee and will give you similarly priced scheme but will probably send you Xmas card and a valuation once a year for taking between 0.5% and 1% of you fund extra. They may tell you they managed your investments but very few IFAs actually do, Scottish Life have a Governed Portfolio range which you probably have.

As for the 20% that's OK if you chose to join the scheme, if you were auto-enrolled then its on shaky ground as all fees need to be agreed between the person paying the fees and the ones receiving the advice.
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Old 30th Sep 2013, 22:06   #9
dowie
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Quote:
Originally Posted by Bossk128 View Post
I guess I'm questioning the value for money of the IFA: if it is a GPPP is there anything the IFA does, and is it managed by Scottich Life, or do you think my the IFA has an active hand in managing the pension pot?
An IFA is usually just a salesman who's passed some fairly basic exams which allow him to sell you financial products.... I'd be rather worried if one of them was playing at being a fund manager... (then again most of them regularly fail to beat an ordinary tracker fund)
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Old 1st Oct 2013, 06:22   #10
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Originally Posted by dowie View Post
An IFA is usually just a salesman who's passed some fairly basic exams which allow him to sell you financial products.... I'd be rather worried if one of them was playing at being a fund manager... (then again most of them regularly fail to beat an ordinary tracker fund)
Most IFAs will be closed soon when RDR comes into full effect.

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Old 1st Oct 2013, 06:30   #11
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Originally Posted by jamief View Post
Most IFAs will be closed soon when RDR comes into full effect.
RDR is in effect and adviser numbers have risen over the last year.
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Old 1st Oct 2013, 09:12   #12
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Quote:
Originally Posted by dowie View Post
An IFA is usually just a salesman who's passed some fairly basic exams which allow him to sell you financial products.... I'd be rather worried if one of them was playing at being a fund manager... (then again most of them regularly fail to beat an ordinary tracker fund)
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Most IFAs will be closed soon when RDR comes into full effect.
Jesus. This is why I'm afraid you should take all forum advice with a pinch of salt. Utterly utterly clueless.

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Old 1st Oct 2013, 09:29   #13
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I don't believe there is anything incorrect about what I posted AFAIK - most IFAs are just people flogging packaged products who've passed some basic exams.
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Old 1st Oct 2013, 09:36   #14
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You are 100% incorrect. Stop spouting nonsense.

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Old 1st Oct 2013, 09:38   #15
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I don't believe there is anything incorrect about what I posted AFAIK - most IFAs are just people flogging packaged products who've passed some basic exams.
It's easy to believe anything you say if you have no factual backing for it.
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Old 1st Oct 2013, 09:39   #16
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You are 100% incorrect. Stop spouting nonsense.
??? if you disagree with something then perhaps try articulating your thoughts
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Old 1st Oct 2013, 09:42   #17
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It's easy to believe anything you say if you have no factual backing for it.
http://en.wikipedia.org/wiki/Indepen...ancial_Adviser

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Up to the end of 2012 all financial advisers only required a qualification at Level 3 or above of the Qualifications and Credit Framework. From the end of 2012, financial advisers will need to be qualified at Level 4 or above. (This is about the same as completing the first year of a university degree.)
so they used to have to pass some rather basic exams equivalent to A-Levels... now they've stepped up to having a qualification equivalent to the 1st year of an undergrad degree....

are you going to dispute that they're salespeople or that they generally sell packaged products?
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Old 1st Oct 2013, 09:51   #18
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I am going to tell you that I am an IFA, that qualifies me to know a damn site more on the matter than you. Passing a few basic exams? Don't make me laugh. But of course I would say that wouldn't I.

We do not just sell packaged products.

No we don't sell, we advise. It is not uncommon for advice to result in no sale of product, that's not how it works or how we get paid.

Do you think all IFA's are the ones you see sat at a desk in the corner of your local Lloyds branch?

Stop talking nonsense about something you clearly know nothing about.

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Old 1st Oct 2013, 09:54   #19
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Quote:
Originally Posted by dowie View Post
http://en.wikipedia.org/wiki/Indepen...ancial_Adviser



so they used to have to pass some rather basic exams equivalent to A-Levels... now they've stepped up to having a qualification equivalent to the 1st year of an undergrad degree....

are you going to dispute that they're salespeople or that they generally sell packaged products?
Ok, allow me to rephrase, have you sat any of the QCF papers from the CII or CISI? Do you have any idea of their content or difficulty? What about the CPD requirements that all IFAs must satisfy in order to retain their Statement of Professional Standing? Or the fact that IFAs must pass the appropriate FCA checks to be considered 'Fit and Proper'?

It's all too easy to extract a single comment from a Wikipedia article and misconstrue it. Having sat my QCF 4 papers, I can say categorically that the content is far more technical than anything I sat during my first year of University, but also far more relevant to understanding financial instruments and the various scenarios and suitability of them to individual investors.

The suggestion that they are salespeople is really rather here nor there as it is not qualified to what extent. We are all salespeople in some capacity, whether it's selling a product or selling ourselves. In the context that IFAs provide recommendations for products based upon a number of factors specific to the client receiving the recommendation, then yes, they are salespeople. But it isn't sales in the concept that they earn commission for the products they sell or are somehow remunerated on a per sale basis. The cost of mis-selling a product is perilously high now, to the point that the FCA can revoke an IFAs license if they have been found to mis-sell a product and on top of that charge them inordinately high damages (see: Arch Cru and Keydata structured products).

Now, I don't dispute that there are (as with any profession) bad examples. I will hold my tongue on naming and shaming a few who I believe tarnish their reputation to a degree, but the reality is that the stakes of being an IFA have risen so high now that the penalties for behaving in such a way make it madness. Some of the IFAs I work with have been stung with 500,000 bills to pay to the FCA because they recommended products that the FSA themselves signed off as 'suitable for retail investors.' Christ, there are people out there who have had their licenses revoked for recommending other products that the FSA also signed off as being suitable.

I know Orch is an IFA himself and I have been working with IFA practices throughout the UK for years now and it seems that your opinions are based on either a bad experience years ago or just a general lack of understanding of the financial advice industry as a whole.
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Old 1st Oct 2013, 09:57   #20
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I am going to tell you that I am an IFA, that qualifies me to know a damn site more on the matter than you. Passing a few basic exams? Don't make me laugh. But of course I would say that wouldn't I.
yup you would...though it explains why you're seemingly getting a bit butt hurt over this...

To become an IFA simply requires passing some basic exams... if you've gone and taken some advanced wealth management qualifications or something then good for you... most of your contemporaries only require some very basic level 4 qualifications in order to practice

as for not being sales people... get a grip...

Quote:
Do you think all IFA's are the ones you see sat at a desk in the corner of your local Lloyds branch?
Those wouldn't be IFAs... the key word being 'Independent'
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Old 1st Oct 2013, 10:00   #21
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Ok, allow me to rephrase, have you sat any of the QCF papers from the CII or CISI? Do you have any idea of their content or difficulty? What about the CPD requirements that all IFAs must satisfy in order to retain their Statement of Professional Standing? Or the fact that IFAs must pass the appropriate FCA checks to be considered 'Fit and Proper'?

It's all too easy to extract a single comment from a Wikipedia article and misconstrue it. Having sat my QCF 4 papers, I can say categorically that the content is far more technical than anything I sat during my first year of University, but also far more relevant to understanding financial instruments and the various scenarios and suitability of them to individual investors.

The suggestion that they are salespeople is really rather here nor there as it is not qualified to what extent. We are all salespeople in some capacity, whether it's selling a product or selling ourselves. In the context that IFAs provide recommendations for products based upon a number of factors specific to the client receiving the recommendation, then yes, they are salespeople. But it isn't sales in the concept that they earn commission for the products they sell or are somehow remunerated on a per sale basis. The cost of mis-selling a product is perilously high now, to the point that the FCA can revoke an IFAs license if they have been found to mis-sell a product and on top of that charge them inordinately high damages (see: Arch Cru and Keydata structured products).

Now, I don't dispute that there are (as with any profession) bad examples. I will hold my tongue on naming and shaming a few who I believe tarnish their reputation to a degree, but the reality is that the stakes of being an IFA have risen so high now that the penalties for behaving in such a way make it madness. Some of the IFAs I work with have been stung with 500,000 bills to pay to the FCA because they recommended products that the FSA themselves signed off as 'suitable for retail investors.' Christ, there are people out there who have had their licenses revoked for recommending other products that the FSA also signed off as being suitable.

I know Orch is an IFA himself and I have been working with IFA practices throughout the UK for years now and it seems that your opinions are based on either a bad experience years ago or just a general lack of understanding of the financial advice industry as a whole.
Well explained, much better than my rambling attempt.

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Old 1st Oct 2013, 10:01   #22
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yup you would...though it explains why you're seemingly getting a bit butt hurt over this...

To become an IFA simply requires passing some basic exams... if you've gone and taken some advanced wealth management qualifications or something then good for you... most of your contemporaries only require some very basic level 4 qualifications in order to practice

as for not being sales people... get a grip...



Those wouldn't be IFAs... the key word being 'Independent'
I'm not going to continue arguing with you. It's a waste of time. You just carry on jumping into other peoples threads giving false opinions. I need to get back to flogging some packaged products I know nothing about.

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Old 1st Oct 2013, 10:03   #23
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Ok, allow me to rephrase, have you sat any of the QCF papers from the CII or CISI? Do you have any idea of their content or difficulty?
yup.. though it was the SII... 3 exams: financial regs, securities and derivatives

difficulty - low... these were 'level 3' qualifications at the time... equivalent to 'A-Level'... you turn up at a test centre and sit a multiple choice exam - its not rocket science anyone who works in financial services in a regulated role has to pass these sorts of exams...


Quote:
What about the CPD requirements that all IFAs must satisfy in order to retain their Statement of Professional Standing? Or the fact that IFAs must pass the appropriate FCA checks to be considered 'Fit and Proper'?
tick in the box stuff... "pass the appropriate FCA checks" get over yourself...


Quote:
Having sat my QCF 4 papers, I can say categorically that the content is far more technical than anything I sat during my first year of University, but also far more relevant to understanding financial instruments and the various scenarios and suitability of them to individual investors.
I guess it depends on your degree... I've not seen much that would upset most science graduates... even CFA exams just cover basic undergrad maths/stats... a lot more rote learning but nothing particularly deep or technical... just lots of material

Quote:
The suggestion that they are salespeople is really rather here nor there as it is not qualified to what extent. We are all salespeople in some capacity, whether it's selling a product or selling ourselves.
it was relevant to my comment that I'd be worried about an IFA managing funds.... as most of you are essentially sales people who've passed some basic exams...
Last edited by dowie; 1st Oct 2013 at 10:05.
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Old 1st Oct 2013, 10:32   #24
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yup.. though it was the SII... 3 exams: financial regs, securities and derivatives

difficulty - low... these were 'level 3' qualifications at the time... equivalent to 'A-Level'... you turn up at a test centre and sit a multiple choice exam - its not rocket science anyone who works in financial services in a regulated role has to pass these sorts of exams...
So by your own admission, standards have increased.

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tick in the box stuff... "pass the appropriate FCA checks" get over yourself...
Everybody's experience for this is different, but I'm going to guess you haven't been through the process recently or have a limited back book of business?

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I guess it depends on your degree... I've not seen much that would upset most science graduates... even CFA exams just cover basic undergrad maths/stats... a lot more rote learning but nothing particularly deep or technical... just lots of material
Economics for me, which was never really as technical as I'd have liked it to be, if I'm honest. I'll concede that exams on regulation are usually very straightforward - how many different ways can you get into trouble etc - but there are a great number of difficult papers out there if you want to progress beyond the minimum QCF4 (which will obviously be raised to QCF6 soon enough).

As to CFA exams being basic, I'm sorry, but I really disagree here. CFA Level 1 is fairly simple if you've done the IMC or similar, but once you progress to CFA 2 and 3, we're talking 6 hour exams and MSc equivalent questions. I'm just about to start part-time study for my MSc in Wealth Management with the CISI, a course which has a <60% pass rate for near enough 3 years of study. It isn't a case of simply turning up and facerolling a pass for many of the accredited courses that people are turning to now. I'm not alone in noticing that many of the more forward-looking practices are seeing QCF4 as a bit of an embarrassment and that acquiring chartered status is a must, something that I welcome.

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it was relevant to my comment that I'd be worried about an IFA managing funds.... as most of you are essentially sales people who've passed some basic exams...
You can belittle anything when you say it like that, so I'm not really sure what the point you're trying to make with this statement is.
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Old 1st Oct 2013, 12:22   #25
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Don't feed the troll - let him be.

One thing I would check is the fact that I'm surprised that the IFA can still take 20% of the 1st years premiums as his fee.

Under RDR, Commission (which that is effectively) is banned and thus a fee has to be taken. Speaking to my Scottish Life rep, he said that the old way of taking a % of 1st years premiums is not allowed any longer as it can fall foul of both the "commission" and in effect a "consultancy fee" which is not allowed under Auto enrollment which a number of employers are moving towards.

DWP ban consultancy charges in auto enrolment schemes

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Individual advice cannot be used to pay for the cost of services that deliver benefits to the employer. Such services include scheme establishment, default contribution structure and default investment fund. The cost of these services needs to be paid by the employer as a fee.
If you want the IFA to return it and review your fund each year, then an ongoing fee is going to be payable if someway shape or form.

1% employer contribution is not a lot at this time but will increase as you company moves towards their "staging date" under the new Auto Enrollment pension scheme. Likely to be 3% when they get to the date (between now and 2017 generally)
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Old 1st Oct 2013, 12:35   #26
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Don't feed the troll - let him be.

One thing I would check is the fact that I'm surprised that the IFA can still take 20% of the 1st years premiums as his fee.

Under RDR, Commission (which that is effectively) is banned and thus a fee has to be taken. Speaking to my Scottish Life rep, he said that the old way of taking a % of 1st years premiums is not allowed any longer as it can fall foul of both the "commission" and in effect a "consultancy fee" which is not allowed under Auto enrollment which a number of employers are moving towards.

DWP ban consultancy charges in auto enrolment schemes



If you want the IFA to return it and review your fund each year, then an ongoing fee is going to be payable if someway shape or form.

1% employer contribution is not a lot at this time but will increase as you company moves towards their "staging date" under the new Auto Enrollment pension scheme. Likely to be 3% when they get to the date (between now and 2017 generally)
On individual policies:

You can still do % of first years premium, but it can't be indemnified, its either 100% of premium until fee is paid or % of first years premium. Either way the fee is only paid when the premium is paid.

On group scheme:

I agree, it shouldn't be allowed at least under auto-enrollment since the employers is obliged to pay the money, the cost of setting up the scheme is their responsibility. I don't see how the pensions trustees can pay for advice the member didn't agree to. (I know its happening though)
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Old 1st Oct 2013, 12:40   #27
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The 20% is an initial fee.
OK, badly worded. I meant that there is a fixed fee payable once. The IFA arrangement is a % (worse for large contributions) and is payable on any future increases. I would prefer the fixed fee in this case.

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Originally Posted by booyaka View Post
One thing I would check is the fact that I'm surprised that the IFA can still take 20% of the 1st years premiums as his fee.

Under RDR, Commission (which that is effectively) is banned and thus a fee has to be taken.
It is a fee. It is just expressed as a %. For the first 12 months, a certain amount of money is paid from employee to IFA.

What is being banned is the IFA saying "I'm not charging you anything" and then the platform giving him a backhander that you may or may not know about.

IF this scheme is auto-enrollment then additional restrictions may apply. But it may not be and the company could be getting the charges paid before the rules change and they wouldn't be able to.

Set up pension now when it isn't mandatory -> employees can pay some of the cost.
Set up pension later -> company has to foot the bill.
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Old 1st Oct 2013, 13:06   #28
Orch
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As far as I understand it, The IFA can't charge fees to the plan/member for setting up a group scheme, the employer must meet these, but he can charge individual fees relating to specific client advice.

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Old 1st Oct 2013, 13:09   #29
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Quote:
Originally Posted by PhilGQ View Post
On individual policies:

You can still do % of first years premium, but it can't be indemnified, its either 100% of premium until fee is paid or % of first years premium. Either way the fee is only paid when the premium is paid.
100% correct.

Oh and OP, you have to be given the option to pay the fee upfront from your own pocket, instead of from the premiums.

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Old 1st Oct 2013, 13:17   #30
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Quote:
Originally Posted by Orch View Post
As far as I understand it, The IFA can't charge fees to the plan/member for setting up a group scheme, the employer must meet these, but he can charge individual fees relating to specific client advice.
I thought they could, but that a scheme on that basis doesn't meet the auto-enrollment criteria (i.e. they would have to offer another one that does).

I could be wrong. I have a nice cosy FS scheme, although my wife has a GPPP and I'm sure she had to pay IFA fees despite not receiving individual advice on the pension. She did join 7 years ago so the rules may have changed.
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