Pension exit fee from ltd company to buyout bond

jos_kel

Hi,
My pension advisor is transferring my company pension (as I'm winding up my IT contracting company and going permanent) to a buyout bond. The pension provider is the same at both ends of the transfer.
I'm being told a 4% fee is applicable as the company pension has only been in place 1 year 3 months.
Is this fee reasonable and do I have any other alternatives?
Thanks
Jos

Tow

Why do you need to transfer the pension at all? Just leave it there until you retire or you may even want to restart it in future years.

jos_kel

Tow wrote: »

Why do you need to transfer the pension at all? Just leave it there until you retire or you may even want to restart it in future years.

Can I keep it there eventhough the ltd company is being wound up?

jos_kel

jos_kel wrote: »

Can I keep it there eventhough the ltd company is being wound up?

Advisor said it would still incur fees if left sitting there, so may as well transfer to buy out bond. Am I been told what suits the advisor/provider?

Tow

There will be a standard annual (normally percentage based) management fee, so has the new company's pension. So unless they originally sold you a pup with higher fees than the new companies, I don't see the point in transferring the money. You will lose money selling the old pension's units and lose money buying the new pensions units. The 'Advisor' more than lightly works on a commission basis and guess who gets a share of money you lose in between the buying and selling prices, and may also get a small on going annual share of your management fee...

jos_kel

Tow wrote: »

There will be a standard annual (normally percentage based) management fee, so has the new company's pension. So unless they originally sold you a pup with higher fees than the new companies, I don't see the point in transferring the money. You will lose money selling the old pension's units and lose money buying the new pensions units. The 'Advisor' more than lightly works on a commission basis and guess who gets a share of money you lose in between the buying and selling prices, and may also get a small on going annual share of your management fee...

So can I leave my company pension where it is eventhough the limited company is currently being wound up by my company.
The company I'm taking up a permanent role are allowing me to contribute to a separate new pension.

Browney7

jos_kel wrote: »

Advisor said it would still incur fees if left sitting there, so may as well transfer to buy out bond. Am I been told what suits the advisor/provider?

In short yes. The advisor was probably paid a commission by the insurance company a year ago which they aim to reclaim from you over the next few years from management fees. They also need to cover the costs they incurred setting up the plan and administration etc. The advisor could make an offer to the company to allow them clawback his commission and then set up a new prb under penalties again.

Depends on the company though. You'll incur management fees on your prb too.

Tow

You can leave it there, it does not matter you had a Ltd company. Many people have numerous pension schemes from previous employers, many of the employers no longer in existence.
You can ask the advisor (or company directly) for a detailed written breakdown of the fees/cost to leave the scheme there and the costs in transferring it into the new scheme.

jos_kel

Tow wrote: »

You can leave it there, it does not matter you had a Ltd company. Many people have numerous pension schemes from previous employers, many of the employers no longer in existence.
You can ask the advisor (or company directly) for a detailed written breakdown of the fees/cost to leave the scheme there and the costs in transferring it into the new scheme.

Hmm. Rang pension provider and they seemed to agree, better to not transfer and avoid 7k fee.
I ran this this by advisor asking was I missing something in terms of advantage of transferring to buyout bond.
He said I was and he'd revert with a full answer soon.

Tow

Well you don't want to be missing his commission on the transfer. Many of these 'Advisors' are not direct employees of the pension provider, but are self employed and work largely on commission basis. Think of them like used car sales men...

jos_kel

Tow wrote: »

Well you don't want to be missing his commission on the transfer. Many of these 'Advisors' are not direct employees of the pension provider, but are self employed and work largely on commission basis. Think of them like used car sales men...

Yep. That's why I'll be interested to hear how he thinks it's advantageous for me to transfer into a buyout bond.

SBarrett

Why would you take a €7k hit??

The pension is in your company's name. You are the trustee so you can do what you want with the policy.

After the policy has been in place for 5 years, the transfer penalties will be gone and you can transfer the money to a buy out bond then.

This "advisor" is nothing more than a salesman who is after a commission for setting up a new policy. He is providing you with poor advice and is certainly not working in your interests. Run a mile.

jos_kel

SBarrett wrote: »

Why would you take a €7k hit??

The pension is in your company's name. You are the trustee so you can do what you want with the policy.

After the policy has been in place for 5 years, the transfer penalties will be gone and you can transfer the money to a buy out bond then.

This "advisor" is nothing more than a salesman who is after a commission for setting up a new policy. He is providing you with poor advice and is certainly not working in your interests. Run a mile.

Yep I've told provider not to proceed with transfer until/unless I advise. Advisor said there is a good reason to proceed. Sure I'll listen with caution anyway.

micar

Have a look at the initial commission. Talk directly to the provider and see as the money is staying with them would they waive the penalty. Threaten to transfer the money out. Retention is key at the moment. Come to an agreement with the pension provider and broker so that the penalty/initial commission/allocation rate means that the gross value of your policy will equal the initial value of your new policy.

NeilMcG15

I'm a finiancial advisor myself and I have one question, is it an executive pension you are transferring from ? If so, there should be no exit fees and the bond should be cheaper for you to transfer to.
Let me give you an example of when to transfer to a prb and when not to and how a financial advisor gets paid without impacting the clients fund.
If company is wound up, an executive pension can't be contributed to anymore so if your paying a 1%+ Fund management fee then you could transfer to a prb as they carry the same rules as your old scheme + can offer you a fund management as low as 0.5% depending on which company you want to go to. There is a gross allocation to the insurance company on the transfer usually 103%. So, 100% of your money goes to the prb I get 3% commission and you get a cheaper fund management with a more flexible policy.
When it doesn't work, if you have to leave a plan with exit penalties / wound up fees then transfer to a prb with same higher fund management fee and broker / advisor is taking commission from your pot including his extra 3% that he's already getting !
Sounds like that's whats going on here.
You can pm me if your looking for further advice on your case if this helps your query too.

jos_kel

NeilMcG15 wrote: »

I'm a finiancial advisor myself and I have one question, is it an executive pension you are transferring from ? If so, there should be no exit fees and the bond should be cheaper for you to transfer to.
Let me give you an example of when to transfer to a prb and when not to and how a financial advisor gets paid without impacting the clients fund.
If company is wound up, an executive pension can't be contributed to anymore so if your paying a 1%+ Fund management fee then you could transfer to a prb as they carry the same rules as your old scheme + can offer you a fund management as low as 0.5% depending on which company you want to go to. There is a gross allocation to the insurance company on the transfer usually 103%. So, 100% of your money goes to the prb I get 3% commission and you get a cheaper fund management with a more flexible policy.
When it doesn't work, if you have to leave a plan with exit penalties / wound up fees then transfer to a prb with same higher fund management fee and broker / advisor is taking commission from your pot including his extra 3% that he's already getting !
Sounds like that's whats going on here.
You can pm me if your looking for further advice on your case if this helps your query too.

Thanks. I will ring the provider to check if it's an executive pension. I guess it is as I was a director of my own limited company and an employee of that same company of course. I will PM you if necessary after I confirm all.
I thought it very suspicious that the advisor only mention exit fees after I had signed the forms to give permission to proceed with the transfer to a buyout bond. Since then I've obviously rang the provider and told them to ignore this request (for the moment at least)

Browney7

micar wrote: »

Have a look at the initial commission. Talk directly to the provider and see as the money is staying with them would they waive the penalty. Threaten to transfer the money out. Retention is key at the moment. Come to an agreement with the pension provider and broker so that the penalty/initial commission/allocation rate means that the gross value of your policy will equal the initial value of your new policy.

Not when they can contractually charge 5% to recoup the 5 they paid to broker plus the fees they got to date. If its 5,5,5,3,2 structure and you were 2 years in theyd be delighted! The last bit could be done though but the customer would still lose about 0.25% 100/.95*1.05 but with some providers they'll only take 5% of the initial investment.

NewCorkLad

OP from the sounds of it the first thing I would be doing is changing adviser as he is just trying to cream you for all your worth.

Leave the pension their for the next 4 years at that stage no exit penalties will apply, you can then decided if you want to transfer it into a PRB or combine it into your new employee pension scheme. Just make sure you are happy with how it is invested now and keep an eye on it.

jos_kel

NeilMcG15 wrote: »

I'm a finiancial advisor myself and I have one question, is it an executive pension you are transferring from ? If so, there should be no exit fees and the bond should be cheaper for you to transfer to.
Let me give you an example of when to transfer to a prb and when not to and how a financial advisor gets paid without impacting the clients fund.
If company is wound up, an executive pension can't be contributed to anymore so if your paying a 1%+ Fund management fee then you could transfer to a prb as they carry the same rules as your old scheme + can offer you a fund management as low as 0.5% depending on which company you want to go to. There is a gross allocation to the insurance company on the transfer usually 103%. So, 100% of your money goes to the prb I get 3% commission and you get a cheaper fund management with a more flexible policy.
When it doesn't work, if you have to leave a plan with exit penalties / wound up fees then transfer to a prb with same higher fund management fee and broker / advisor is taking commission from your pot including his extra 3% that he's already getting !
Sounds like that's whats going on here.
You can pm me if your looking for further advice on your case if this helps your query too.

Thanks I've asked the 'advisor' if it's an executive and his response is "that is just for marketing purposes. Under revenue rules it is an employer sponsored pension scheme".
Sounds a bit ambiguous to me.
Based on this what should the exit fees be?

The J Stands for Jay

jos_kel wrote: »

Thanks I've asked the 'advisor' if it's an executive and his response is "that is just for marketing purposes. Under revenue rules it is an employer sponsored pension scheme".
Sounds a bit ambiguous to me.
Based on this what should the exit fees be?

Early encashment charges can apply to executive pensions, and the commission-chaser is correct that it's just a marketing term for an occupational pension scheme. But it still sounds like he's trying to milk your pension.

SBarrett

jos_kel wrote: »

Thanks I've asked the 'advisor' if it's an executive and his response is "that is just for marketing purposes. Under revenue rules it is an employer sponsored pension scheme".
Sounds a bit ambiguous to me.
Based on this what should the exit fees be?

It's not for marketing purposes!! Buy Out Bonds are specifically for ex employees to transfer their old company pensions into their own name so they can have control over them. They have the same rules as the scheme they have transferred from.

In the OP's case, he is the old employer so he has no need to transfer it out and take a loss.

This guy is only interested in earning himself a commission. No decent advisor would ever tell someone to take such a big hit when there is absolutely no need to do so. You should report him. He shouldn't be allowed to advise people on their money. Cut off all communication with him.

The J Stands for Jay

SBarrett wrote: »

This guy is only interested in earning himself a commission. No decent advisor would ever tell someone to take such a big hit when there is absolutely no need to do so. You should report him. He shouldn't be allowed to advise people on their money. Cut off all communication with him.

Who can these 'advisors' be reported to?

jos_kel

McGaggs wrote: »

Who can these 'advisors' be reported to?

Thanks for the great advice and who can I report them to?

By the way, after a week, the 'advisor' still hasn't got back to me with a good case for transferring to a buyout bond.
The silence is telling

SBarrett

McGaggs wrote: »

Who can these 'advisors' be reported to?

If they are an employee of a company, I would talk to there boss and let them know what is going on.

If you want, you can report them to The Central Bank. Below are the first three principles of the Consumer Protection Code, something that applies to all regulated bodies:

A regulated entity must ensure that in all its dealings with customers and within the
context of its authorisation it:
2.1 acts honestly, fairly and professionally in the best interests of its customers and the integrity of the market;
2.2 acts with due skill, care and diligence in the best interests of its customers;
2.3 does not recklessly, negligently or deliberately mislead a customer as to the real or perceived advantages or disadvantages of any product or service;

whitecoatman

Hi there,

I'm new to boards, so please take it easy on me

One point to note on this potential transfer OP, you have mentioned that your company is been liquidated / wound up, and when you established the Company Pension, and you assumed a number of roles (member, employer etc) you also signed "For and on behalf" of the company if they are acting as trustees.

Therefore as the company is a legal entity in its own right and I'm assuming is acting as trustees for the pension, an authorisied individual will have to sign for the trustees to release the funds within the pension, if this is not done before the liquidation / wind up is completed it can cause issues at a later date (trying to prove ownership)

if you are currently talking to the same individual who established the Company Pension, i would ask them how much they received for putting this in place and what the gross Allocation on the Retirement Bond is and this should cover some of the penalties that might be incurred.