PlatformsSep 5 2013

Pension switching tool could cut charges by 70%

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Advisers could save up to 70 per cent of pension charges when switching a clients pension if they focus on utilising a client’s existing platform arrangement, according to a platform due diligence firm that has launched a switching analysis tool.

According to Colin Turton, director of Adviser Asset, many advisers are stuck in the old days and still go directly to life companies to set up clients’ pension, only after this considering how to ‘wrap’ the product and whether it should be placed on a platform.

Mr Turton said if an adviser invests through a platform where the client already holds money they might get better rates due to holding a higher value of investments, as most operators reduce charges as investment pots increase. The adviser should only then decide between options for underlying investments and how they will ‘wrap’ the assets.

Adviser asset has launched a free tool for advisers and paraplanners which takes into account the impact of non-pension investments on charges relating to a pension switch. Mr Turton claimed advisers can reduce pension fees by as much as 70 per cent.

The new tool also compares multiple classes of the same fund and includes the option to wrap third-party pension wrappers around pension assets held on a platform, Mr Turton said.

“If an adviser is going to be adding to that investment already on a platform with a pension switch then the investment sits on top of the existing investment. Higher levels of investment attract preferential rates.

“For some platforms, the platform charge can reduce by 70 per cent if a pension investment or switch is placed on top of an existing platform account, irrespective of the wrappers involved. I’ve been surprised by the number of advisers who are seeking to select a pension product before having defined the investment portfolios to be used.

“It’s not possible to compare solution cost by assuming an imaginary fixed fund charge. What makes this even harder is that some pension switching tools allow platforms or providers to select their own default fund to be used, making a like-for-like comparison impossible.”