ArticleCity.comArticle Categories How will I be charged for pension advice?

How will I be charged for pension advice?

Photo from Unsplash

Originally Posted On:


Financial advisers will have different ways of charging for their services.

Advisers must agree up front how much you will be charged for their services, when you’ll be charged and how payments will be made to them. There are three main ways you will be charged.

Flat fees

A one-off charge that covers everything from the fact find to the plan implementation. Tailored to your needs, but could vary wildly from adviser to adviser. You could be charged an initial fee for the recommendations and then a flat fee annually for reviews or each piece of work your adviser undertakes.

Hourly fees

Simple and easily evidenced, but beware, as this method may be less of an incentive for the adviser to work quickly. You could expect to pay anything between £50 and £250 per hour.

Proportion of the money you want to invest

This is a percentage of your assets. You could be charged an initial fee, usually ranging between 1% and 4%, and an ongoing, annual charge between 0.5% and 1.5%. Note that if you have a smaller amount to invest, an adviser who uses this method of charging might be reluctant to take you on, as they might feel the amount of revenue they would generate might not justify the cost of offering you their service.

How much does pension advice cost?

In May 2018, Which? surveyed more than 100 IFAs to find out how they charge clients. Some 79% of firms charge up-front percentage fees based on the amount invested, 71% apply upfront fixed fees and 53% have a standard hourly rate. We also asked them to quote us on a range of retirement-related scenarios.  Pension advice about converting a £100,000 pot into retirement income costs an average of £1,837 or 1.84% of the fund value. Combining pension pots worth £150,000 and opening a Sipp incurs average fees of £2,897.

How can I afford to pay for pension advice?

 The cost of financial advice on your pension can run into thousands of pounds.  Recognising this, the pensions industry has created some alternative ways to fund the cost of pension advice without you having to find a large lump sum up front.

The pension advice allowance

Introduced in April 2017, the pension advice allowance lets you withdraw up to £500 from your pension savings to put towards the cost of retirement and pensions advice. This £500 allowance can be used three times, so you can access retirement advice at different stages of your life. You may, for example want advice when choosing a pension, and again when you’re deciding what to do with your savings. However, you can only use one of your three withdrawals per tax year. The good news is that you won’t be charged any tax on your withdrawal, provided you use it to pay for financial advice. The pension advice allowance is available at any age, but can only be used by people who have a defined contribution pension. The scheme is not available for those that have a defined benefit, or final salary, pension.

Employer-funded advice

Companies can offer to pay for financial advice for their employees without paying income tax. This tax-exemption has always existed – but has been increased since April 2017 from £150 to £500. In combination with the pension advice allowance, this means you could get £1,000 towards paying for pension or retirement advice.

Source: Which?

No Comments

Sorry, the comment form is closed at this time.