How to use this calculator
This calculator highlights the impact of high fees when transferring a pension. When it comes to investing, no one can predict markets and how they perform. The only thing investors can control is costs. If you are looking into a pension transfer and are unsure of the fees you are facing, speak to one of our team who will go through the charges in your proposal with you. It is worth noting that Portfolio Bonds have other costs that are often unclear, such as spreads on buying and selling assets and charges for switching currencies that can be as much as 1% or higher.
Initial Investment/Transfer Value: If you are transferring out of a Defined Benefit scheme, this is the amount that your pension scheme is offering you to exit the scheme. If you have a Defined Contribution Pension/s, this is the total pot value.
Defined Benefit Report Charge: To transfer a Defined Benefit pension that has a value of over 30,000 GBP, an independent report is required. Advisories typically make a profit on this requirement by adding their own charges on top of the charges from the report writer. Typical costs are between 2,500-3,500 GBP once the advisor has added their cut.
Upfront Fee For Transfer: This is the amount the advisors charge for the transfer. Typically 3.5%, but advisors will negotiate to win business. It is worth noting that if an advisor reduces their upfront fee they are likely to compensate their loss of income by using commission paying funds in the portfolio they recommend.
Annual Trustee Fee: The trustee keeps the funds inline with UK pension rules. This is usually a fixed yearly cost anywhere between 800 – 2000 GBP.
Annual Management Fee: This is the advisor’s ongoing service charge. Typically 1% but some companies will reduce the annual fee in exchange for a reduced level of service, or will reduce the charge to win the business but use commission paying funds.
Total Portfolio Cost: This is the cost of the underlying investments in the portfolio. This is often the hardest place to identify costs clearly as funds will declare growth net of fees. Other investments such as Structured Notes pay extremely high commissions that are not disclosed to the client. A typical fund portfolio from an advisory will be costing between 1-3%, out of which a quarterly kick-back may be paid to the advisor.
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