Question and Answer U.K expat moving to New Zealand in regards to U.K. pensions
I am in the process of sorting out getting some UK Pension money back to NZ (not much, just a few thousand pounds). I’ve been going through a company to organize the transfer and have now been talking to a financial advisor about the selection of funds we can use in NZ. The problem I have spotted is that the financial advisor now wants to charge a 1% per annum fee for the life of the fund (on top of the fund manager’s fee). Is this normal or should I question it? Given it’s a retirement fund I was just expecting it to be a set and forget kind of thing and not need ongoing ‘financial advice’.
Charging 1% for the life of the policy is not normal as it shouldn’t have a life.
These are only applicable to offshore bonds and for the most part, many should stay away from offshore bonds as they are complicated high cost products in the majority. Some aren’t but there are a lot fewer of those. If you are transferring to SIPPs or a QROPs it can make the most sense to stay away from offshore bonds.
Also, it is worth noting that now most advisors don’t essentially advise to go into QROPs unless the amount is over 250,000 GBP as the high trust cost doesn’t make it worth it in most cases. Although, that isn’t specific advice. You will need to be assessed as an individual.
Many opt to transfer to an International SIPP that from a cost perspective can be much cheaper, some of the cheapest platforms that are FCA regulated for international clients (living outside the U.K.) are Novia, which cost 0.34%. Novia are FCA regulated and only allows clean class shares and funds.
It has a trust option that charges 180 GBP a year.
Advisors, do pay for this of course as their time like most people is not free, they have the ability to charge in a number of ways
- Hourly fee (normally around 100-250 GBP an hour)
- Transaction fee so an initial transfer for transferring your pension over (Norm is 1-3%)
- Report cost 900-4000 GBP for a report
- The percentage of AUM is usually 0.5%-1% of the asset they are managing.
What to watch out for is commission-based, these are usually placed in the offshore bonds, structured notes and high paying funds. Stay clear of these unless you have done your research.
Things to watch out for are
- Offering advice for free
- Going into an offshore bond with an establishment charge and admin charge that you have to keep in for a term. One offshore bond that is fee-based with no term is Momentum which charges 0.65%-0.45% (depending on the amount) with no lock-in period.
- Stating they get paid from the funds/life company normally will not be in your best interest.
Summary
If you are in a situation similar to this and want to run through some particular questions, please email me at info@investmentsforexpats.com.
