Should You Negotiate the Advice Fees for Your UK DB Pension Transfer?

Negotiating fees or price is something that we naturally do when buying a product or service. This is common even in the UK Pension Transfer industry. However, is it a good idea to negotiate the price?

Transferring your UK Pension is a decision you should not take lightly. As we always remind our clients, or perhaps you already have done your research, a Pension Transfer is a thorough process that cannot happen overnight.

In particular, the process for the Final Salary or Defined Benefit (DB) Pension transfer typically takes a longer period of time. This is because the FCA requires you to consult a registered and qualified IFA who holds the qualification of Pension Transfer Specialist, if your DB Pension value is above £30,000.

In this consultation process, a detailed advice report has to be produced that assesses your viability for transferring under FCA guidelines, no such in depth report is required for transferring from a Defined Contribution (DC) pension. Additionally, the DWP’s implementation of the new flagging system at the end of November 2021 has slowed down most pension transfers and has resulted in your statutory right to transfer being removed if a transfer is deemed unsuitable or a red flag is raised. Read more about the new flagging system here.

You might be wondering about the cost and fees you should spend transferring your UK Pension into a personal pension such as an International SIPP or QROPS. Some of you might be questioning the fees for the financial advice and be asking for them to lower the fees or ask for a discount.

In this case, let us help you break down all the essential things to consider if you are about to negotiate the fees for the financial advice required for your UK Pension Transfer. More specifically, for the Defined Benefit Pension Transfer.

The Fees Structure

There are many FCA-regulated IFAs in the UK Pension industry to choose from. Each IFA will have a fee structure you can choose from that you feel comfortable with.

In general, there are no rules that regulate the fees of an advisory service set by the IFAs, meaning that it is an entirely commercial decision by the IFAs themselves. The average annual fee for a DB Pension Transfer cost is 1.9%, broken down into IFA fees, SIPP (if you are advised to transfer to SIPP), platform fees, and funds.

With this in mind, you must understand the fee structure of your preferred IFA. Understanding the fee structure can reflect what your IFA will do for you and how they will be involved with your UK Pension Transfer process. By understanding the fee structure, you can also decide whether it is worth a shot to work together with the IFA.

At Cameron James, the cost of services is not negotiable, because we offer the cheapest fees you can have when it comes to UK Pension Transfer costs. Take a look at the table below for a better understanding of our costs:

UK Pension Transfer Fees at Cameron James

As you can see above, we offer 1% annual ongoing fees for all clients. As you move into different AUM bands, we offer a smaller percentage fee for the initial set up and transfer fee. All in with Cameron James your cost (IFA, SIPP, platform, and funds) would total approximately 1.5% p.a., beating the UK average of 0.9% for DB ongoing fees according to XPS pensions.

At Cameron James, we are one of the market’s lowest-cost providers that allows  our clients to proceed whether the advice is to transfer or remain. If we provide a UK-only service, we would need to charge a minimum of £25,000 for pension transfer advice like the other UK firms. Our annual PI insurance for insistent clients is enormous, but in context, great value as we operate in 4 licenced areas which gives us economy of scale.

With our below industry-standard fees and all the benefits we offer, it does not mean we give service that is below par. In fact, as you can see on our Google Reviews, we are given 5 stars reviews by all of our clients. Our affordable cost comes together with our high level of service.

CETVs for DB Pension Transfer

If you have a DB Pension and are considering transferring, we advise you to approach it cautiously. As we stated above, there are regulations set in place and requirements you must meet before you can proceed with your DB Pension Transfer. The FCA and DWP put in place these regulations to prevent you from getting scammed.

One of the other most essential things about a DB Pension Transfer is your CETV. Your CETV plays a significant role in your DB Pension Transfer process. Your pension administrator will calculate the value of your DB Pension into a lump sum that is available to transfer or invest into a new personal pension scheme, such as an International SIPP or QROPS. The value of your CETV is influenced by a number of factors:

  • Age
  • Normal retirement age
  • Living costs
  • Life expectancy
  • Investment scheme
  • UK gilt rate
  • Marital status

Keep in mind that the Bank of England has hiked interest rates by 0.25% to 1% on June 5th, 2022, to mitigate inflation that recently hit a high of 10%. With the higher current interest rates, your CETV value will have some downward impact, although this is balanced out by higher inflation which increases CETV values. Watch one of our videos below to understand the importance of CETV and why the current situation is the best time to get your CETV.

At Cameron James, to have your advice report it typically costs between £3000-£3500 plus VAT, depending on how many DB schemes you have, and the CETV value of each. 

Why You Should Not Negotiate the Advice Fee for Your DB Pension Transfer

As you can see above, we break down the fee structure, the importance of CETVs, and the cost to complete r your DB Pension Transfer process. Your DB Pension is a safeguarded benefit that will guarantee your lifetime income at a fixed rate. Not only Cameron James, but the TPR and FCA also deemed this by putting regulations in place to ensure your DB Pension Transfer process is conducted safely and securely.

While the advice fee for the DB Pension Transfer is a commercial decision, the advice fee is set based on multiple factors considering the time and effort required for the DB Pension Transfer. Keep in mind that nobody in the financial industry is providing the advice for free. With all the considerations above, negotiating advice fees in your DB Pension Transfer is not a good idea. 

In fact, if a company is willing to lower its fees, then it does to some degree weaken the integrity of the firm, as they are charging some clients different prices for the same work.

Additionally, if a company did not already offer you the best price upfront, do you wish to work with the firm going forward, when they have not been 100% transparent on the costs and time involved with the transfer process?

The best thing to do is lots of research to weigh up your options for your DB Pension Transfer and compare the fees across the market. Doing your research and due diligence will help you decide on the best and most reasonable option when choosing IFAs. We understand that a DB Pension Transfer is a timely and costly process. But at Cameron James, we offer you one of the lowest advice fees combined with the highest level of service.

Are you still unsure about fees, or do you have any questions about DB Pension Transfers? Hit the button below for a free initial consultation with one of our qualified and experienced IFAs.

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