Pension Sharing Transfer Costs

A question about : Pension Sharing Transfer Costs

Following divorce am sorting a pension share.

Saw my IFA yesterday. It's already cost an arm and a leg to take funds out and now I see on the very last page of the quote that my IFA will receive almost Ј3k immediately (out of my fund) as commission from the company (Standard Life), who is to open a new pension for me! I must be in the wrong job! How can this amount of commission be justified? ???

Any comments/advice anyone? In hindsight could I/can I approach a company direct to sort this.

Best answers:

• Two questions:
  Is it your pension policy (or company scheme) or your ex-spouse's?
  Is it held within a personal pension policy?
• Edited by Pal at Newcomer's request:
  It's the sharing of my ex-spouse's occupational pension. !Does that answer both your questions?
  We both shared the Ј750 cost of administering the division but now I'm shocked by what appears to be a very large commission to set up the fund for me. !Does this cover me for ongoing advice after the initial consultation and set-up, or is it normally just a one-off payment?
  Thanks.
• As it was an occupational scheme, write back to the Trustees saying that you do not want to transfer out because of the reinvestment costs and you want them to set you up as a member within their fund. They should be able to do this easily. Just because you are splitting your pension rights from your husband's does not mean that you have to transfer out of the scheme.
  The Trustees cannot buy an investment outside of the fund for you, so if you refuse to transfer they have to comply with the court sharing order by setting you up in their fund.
  You need to carefully compare whether you would be better off within your husband's existing fund or transferring it out. It might be worth paying your IFA a fee so that he can help you with this while remaining unbiased.
  Also, ask your IFA for a fixed fee quote instead of commission and an illustration of how the fees on his suggested policy would reduce if you did this. It might save you money to pay the fees up front.
• Thanks for this but unfortunately I did ask if I could remain in their (excellent) scheme, but I wasn't allowed.
  Oh how I wish this statement of yours were true!
  "The Trustees cannot buy an investment outside of the fund for you, so if you refuse to transfer they have to comply with the court sharing order by setting you up in their fund. "
  Could I have been given incorrect advice from them, or have you come across this before?
  Otherwise I will follow your suggestion regarding a fixed fee quote.
  Thanks.
• What sort of pension scheme was it? !Final salary or money purchase? (The position varies depending on the type).
• Final salary.
• OK.
  The Trustees have a specific amount of time to comply with a pension sharing order, and this is specified on the order itself. Failure to do so breaching a court order.
  Also, it is against FSA rules for the Trustees to buy an investment in the name of someone else (it would be like me taking out an ISA in your name).
  As a result if you do not transfer yourself, the Trustees cannot do anything with your money except use it to secure a pension policy for you within their scheme as they have to comply with the court order. The only way they could do that is to buy an annuity in the Trustee's name or pay your pension from within the existing fund, both of which should be cheaper for you than transferring to a personal pension. At the very least it gives you more options to discuss with your IFA.
  The simple thing to do is write and ask them ask them what they will do if you choose not transfer out because of the prohibitive fees of doing so. There is no reason to be shy about this. Simply ask them what would happen. It will be interesting to see how they respond.
  Most final salary trustees want people to transfer out in these cases (which is why they gave you the original advice). But in the end if people do not transfer out the Trustees have to provide pensions of some kind because there is no other option available to them. It is probably worth pressing them a bit to see if they give in before resigning yourself to transferring out.
  Also, if they say they will buy an annuity for you, ask them to give you details of the terms on which it is bought and the rate you get. Get your IFA to check it.
  If they choose a poor annuity provider or a poor rate you can go after them for failing to look after your interests, which is one of their statutory duties as Trustees.
• Forgive my cynicism over fees charged and the financial institutions in general.
  Pensions are such a minefield that seems to leave us wide open to being 'fleeced'. Which was why I was asking if the Ј3k sounded about right. Do you know if they normally work off a percentage of the amount being transferred?
• Wow Pal, I certainly will follow your advice. I mean it's only cost me half of Ј750 so far, but not Ј3k as yet, so plenty to gain.
  It seems such a shame to 'throw away' hard-earned money. Will keep you informed.
  Thanks once again!
  PS Would be interesting if anyone else has challenged in this way.
• No problem. I've never seen it done either so it will be interesting to see how it turns out. (On all the schemes I deal with the Trustees allow the scheme to buy the pension to avoid just this type of problem.)
  The 3k is a percentage of the amount you are transferring. Remember that this is not removed from your fund but is taken back by SL through their fees over a period.
  Ask your IFA whether doing it on a fixed fee would be cheaper for you and get him to give you the comparison in writing.
  A final point that I just thought of.
  The Trustees or your solicitor may have inserted a clause into the pension sharing order that requires you to sign consent to transfer out before the time limit (usually four months) during which they have to implement the order, starts to count down. If there is no such clause in the sharing order then what I said before is OK. If you signed something saying that you will transfer then you could still try arguing but you are less likely to succeed.
• This particular company have been less than helpful towards me, (treated as an outcast no less), and looking after their member's interest. :'(
  Drat, yes just checked the Order and it is in there.
  "Date by which you must set up the pension credit:
  4 months after receipt of the certificate of decree absolute."
  Oh dear, seems my hopes have just been dashed.
• I don't understand this thread much, but can't Newcomer use Cavendish and get the commission reinvested in the pension?
  Forgive my ignorance if I've said something stupid.
• Replying to Pal again:
  Re: "The 3k is a percentage of the amount you are transferring. Remember that this is not removed from your fund but is taken back by SL through their fees over a period. "
  Do you mean will be included within the 1% charges? Because if so, then this would be acceptable.
• If you are being quoted 1% a year (stakeholder?), then yes, that is all you will pay. The commission is being paid to your IFA by SL for bringing you to them, and they will make their money, both for paying the IFA and for managing your funds, out of the 1% a year.
  Fixed fee means that your IFA is paid an agreed amount, and will not be paid anything by SL. What SL would have paid him will be paid into your pension fund, with the net result being that you get a lower annual fee.
  This is why I suggested Cavendish. Check Martin's articles on the main site re: pensions/repensioning. If you know how you want to invest the pension fund, you can save a lot of money by using a discount broker rather than an IFA. If you don't know and need the advice, the IFA will earn his money.
• Thanks will check it out.
• The point is that you might get a lower annual fee by paying your IFA a fee instead of letting him get paid commission. Over time you should save money. Repensioning would not save you any money in this situation.
  The downside is that you have to pay the cash fee up front. Ask the IFA to give you quotes in writing and get him to advise you on which route is best for you to follow.
  Quote:
• Yes, I certainly will let you know, though this thing has dragged on for months, so if I don't get back to you quickly, it's not that I've forgotten. The pension company dragged their feet for ages after being requested info by my IFA and have only recently given a breakdown of the fund (protected rights etc), after they received our Ј750 fee for administering.
  Then I queried why I had to name the pension company I would be using on the form to them, when they'd failed to send the breakdown of info to get a comparison. My IFA said to insert SL and that we could change it later if necessary. Now my confidence has gone in my IFA 'cos SL is seemingly being pushed as opposed to something called a Section 32 or some other number?? I am on information overload and have lost faith.
  Anyway, will continue the struggle armed with your good advice. Thanks.
• A section 32 policy is a deferred annuity. !In other words is buys a specific pension benefit at a certain retirement age. These are usually good if you are buying a specific benefit.
  Your IFA may be recommending SL because he thinks that the SL policy will grow to provide a larger pension than the S32 annuity.
  More to follow later...
• Have a good weekend, you deserve it, looks like you've worked VERY hard today, thanks Pal.