Question
I am in the process of transferring my personal pension funds onto the Skandia platform. I have the choice of two advisers. One is offering me 0.5% for annual review (but monthly review of underlying funds), while the other is offering 1% for quarterly review (and monthly review of underlying funds). The 1% adviser has the most experience, but the other has an intimate knowledge of my main occupational pension scheme. I may wish to take an annuity, or place the funds in drawdown, in 3 years time. How do I decide which adviser is most appropriate for my needs?
One of the advisers has told me that, if my main occupational pension is greater than 20k, the personal pension should be in a SIPP. Is that right? I have never heard this before.Answer
If you'll likely buy an annuity in 3 years time then your investment choice should really be restricted to cash and maybe relatively safe investments such as cautious fixed interest funds. In this context it's unlikely much investment expertise or monitoring will be required, so the 0.5% adviser may suffice (or consider doing it yourself). And perhaps the bigger question is whether you'll derive sufficient benefit from using Skandia for just 3 years to outweigh the cost of transferring your existing pensions.
If you opt for drawdown instead this will require more comprehensive investment planning and monitoring, as your pension fund could remain invested for many more years and income withdrawals require careful monitoring to ensure your fund doesn't run dry. It may well be the 0.5% adviser has sufficient skill and experience to carry out this task perfectly well. But if you feel the more expensive adviser is more capable then perhaps they will carry out a better job.
I'm not particularly comfortable with advisers trying to charge 1% a year, as this is quite steep and can become a significant sum over time. However, you might feel the advice and service you'll receive justifies the cost - it's a free market after all.
As for the adviser's view that SIPPs should be used for pension pots in excess of £20,000, it's debateable. The advent of low cost SIPPs means it's now financially viable to use a SIPP on pension funds of this size. But whether it's a good idea depends on the extent you'll use and benefit from the increased investment choice. And whenever considering a transfer out of a money purchase occupational pension it's vital to check whether you'll lose any valuable benefits, such as employer contributions and subsidised charges.
I am in the process of transferring my personal pension funds onto the Skandia platform. I have the choice of two advisers. One is offering me 0.5% for annual review (but monthly review of underlying funds), while the other is offering 1% for quarterly review (and monthly review of underlying funds). The 1% adviser has the most experience, but the other has an intimate knowledge of my main occupational pension scheme. I may wish to take an annuity, or place the funds in drawdown, in 3 years time. How do I decide which adviser is most appropriate for my needs?
One of the advisers has told me that, if my main occupational pension is greater than 20k, the personal pension should be in a SIPP. Is that right? I have never heard this before.Answer
If you'll likely buy an annuity in 3 years time then your investment choice should really be restricted to cash and maybe relatively safe investments such as cautious fixed interest funds. In this context it's unlikely much investment expertise or monitoring will be required, so the 0.5% adviser may suffice (or consider doing it yourself). And perhaps the bigger question is whether you'll derive sufficient benefit from using Skandia for just 3 years to outweigh the cost of transferring your existing pensions.
If you opt for drawdown instead this will require more comprehensive investment planning and monitoring, as your pension fund could remain invested for many more years and income withdrawals require careful monitoring to ensure your fund doesn't run dry. It may well be the 0.5% adviser has sufficient skill and experience to carry out this task perfectly well. But if you feel the more expensive adviser is more capable then perhaps they will carry out a better job.
I'm not particularly comfortable with advisers trying to charge 1% a year, as this is quite steep and can become a significant sum over time. However, you might feel the advice and service you'll receive justifies the cost - it's a free market after all.
As for the adviser's view that SIPPs should be used for pension pots in excess of £20,000, it's debateable. The advent of low cost SIPPs means it's now financially viable to use a SIPP on pension funds of this size. But whether it's a good idea depends on the extent you'll use and benefit from the increased investment choice. And whenever considering a transfer out of a money purchase occupational pension it's vital to check whether you'll lose any valuable benefits, such as employer contributions and subsidised charges.
Read this Q and A at http://www.candidmoney.com/questions/question745.aspx
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