How free is a free pension review?
The Financial Conduct Authority has strict rules about cold-calling potential clients for regulated financial advisers, so many IFA’s do not solicit for clients in this way. Unfortunately, most cold calling is done by marketing companies, who are unregulated and sell on their leads to IFA’s at considerable cost. As a consequence, if you do take up a “free pension review”, it is likely to be orientated towards a costlier than average solution.
The Telegraph’s Emma Simon put one such “Free Pension Review” company to the test and reported the results in on the website; http://www.telegraph.co.uk/finance/personalfinance/pensions/12136177/This-is-how-cold-callers-tried-to-persuade-me-to-move-my-company-pension.html. In summary, she was offered a SIPP, (Self Invested Personal Pension), solution which would be much more costly to operate than her existing scheme and would cost her 3.5% of her existing fund for the transfer. (We are not told if her employer would agree to pay into an alternative scheme; they have no legal duty).
There are a number of lessons to be drawn from her experience and from ours as IFA’s, the first one being that current occupational pensions schemes, (workplace pensions), are generally very good value, with low charges overall. As a general rule, if you are in an active employer’s scheme, you probably should stay put!
If you do choose to move it, make sure the employer is willing to move any future employer’s contributions as well. They are under no obligation to do so, losing several % of guaranteed employers contribution for a vague possibility of more investment return would be an extremely foolish decision.
So a check-list for pension review decision making:
- Most cold calls will be a poor experience. You will either be dealing with an unregulated company or a regulated company you do not have an ongoing relationship with. Put the phone down, little good will come of it!
- Find yourself an IFA; use us, pick one off the www.unbiased.co.uk website or ask a friend for a recommendation.
- If you only have your current workplace pension, you probably don’t need a full pension review, just advice around fund suitability, the level of premium you should be paying and which route you intend to take for pension income.
- If you have older pension schemes with balances of more than a few thousand pounds, then a review would be in order; to consolidate or not, whether your pension income will be sufficient and how best to take it.
- If you are self employed, then you should have an IFA, to go with your accountant, solicitor and bank manager.
- Make the best of your allowances; once they are gone, they’re gone.
The Financial Conduct Authority is looking to investigate pension introducer firms as they believe they could be responsible for client detriment both now and in the future. This is especially true where advisers are offering only “focused” advice, (perhaps only into a SIPP), or where there is a significant incentive to suggest an unregulated fund or other unusual investment.
For any client or potential client; get involved with your pension funds, either get to the stage where you are happy to manage them yourself, or better still, find an adviser you understand and are comfortable with and treat all cold calls with the contempt they deserve!
Contact me with queries
If anyone is looking for general advice, then please write in to the blog and I would be happy to help with anonymous advice posted here. Alternatively, please call us on 0116 253 5600 and ask to speak to an IFA, (Independent Financial Adviser), for a no-obligation discussion.
If you know you need formal advice, have a look at http://bankfield.net/personal/retirement-planning/, or ask around for a recommendation, it might even be me.