Commission on Transfer to a Buy-Out Bond

Hi there,

Does anyone know what the typical commission / transfer costs for a transfer from a defined contribution pension scheme to a buy-out bond is?

The company I work for has gone into liquidation and I need to transfer my pension out of the company fund.

My financial advisor has got a proposal from a life assurance company for 100% allocation and ongoing fees of 1.35% per year. I have only just found out though that he is charging 5.5% of the balance transfer in the first year as a commission (hence I am really only getting 94.5% allocation). This is a substantial amount of money as the transfer is over 100k. He is not charging any fees in subsequent years but if I transfer the money out of the fund within 5 years there are penalties - hence I can't see there is much more advice he can give me!

Is this really the going rate or do I need to negotiate with the financial advisor?

Thanks

If there are early exit penalties, it's possible that the 100% allocation is after deduction of commission. The pension company may be subsidising the commission, out of future annual charges.

As I'm a Financial Broker myself, it wouldn't be appropriate for me to comment on what another charges for his services. There is no "going rate" and different Financial Brokers can charge different amounts for their services. If you don't feel that you're getting value for the 5.5% of your fund, then do bring it up with the broker.

I presume it was explained to you that a Buy-Out Bond may not be the only option available to you. See this Key Post for alternative possibilities.

Over €5,500 commission for setting up a Buy-Out Bond from a scheme that is winding up? Sounds excessive to me.

For that level of commission, I presume he went through a fairly detailed fact-find and risk analysis with you to determine the most suitable Buy-Out Bond product and fund for your needs? Were other options explored, e.g. other Buy-Out Bond providers? Did you get a detailed recommendation in writing explaining why the particular Buy-Out Bond and fund is most suitable for your needs, over and above others that were considered?

If the answers to any of the above questions are NO then shop around - any Financial Broker can set up a Buy-Out Bond for you.

Usual BOB commission is 2%. You could even argue that commission of 1% for a fund over €100,000 is enough. Its up to you pick your advisor so you are in a strong position to negotiate.

All - thanks for your help. I will go back and try and negotiate downwards. Fingers crossed!