Pension drawdown fees – How much to pay?

When it comes to pension planning and accessing your money, it is always a good idea to talk to an IFA. An adviser can help you to choose the right products and ensure everything is in order. If you need help in this area, Find it Near Me offers a fantastic free service so you can find independent financial advisers in Dunfermline. We can select the best person to work with you.

Pension drawdown

In 2015 new legislation gave people more control over their pension funds. As a result, they were free to move money to different plans and access it in different ways.

Since then, drawdown products have become very popular. They allow people to take money from a pension pot, either in regular smaller amounts or occasional larger chunks, while keeping the pot invested. According to the Financial Conduct Authority (FCA), in 2019/2020 over 200,000 pension pots were put into drawdown.

Paying for services

While drawdown can be a really great option for many people, it is important to look at how much advisers charge for the service. In most cases the charges will be a percentage of the pension pot. Depending on the total you have in your pot, this could end up being a sizeable fee.

Here is a simple example. Placing a £280,000 pension pot into drawdown with a fee of 1.65% would mean paying around £4,600 for the service. Does that sound like too high a price to pay?

The 1.65% fee here is particularly high for the industry. Generally in this situation it would be better to ask for an hourly rate for the job.

Another charging method may be 3,2,1% where the £100,000 is charged at 3%, the second £100,000 at 2% and the remainder at 1%. This would result in a fee of £5,800.00. At this point you can ask the adviser if they would be willing to agree to reduce the initial/arrangement fee. Most would be happy to compromise if the client was willing to work closely with the adviser and provide personal financial details as and when they require them.

Moving a pension into a drawdown does require a bit of work. Here the adviser must look at whether this is actually the right option for you. Plus, they must look at whether you will lose any benefits by moving your pot.

If it is a viable, financially rewarding option, the adviser will choose a drawdown product for you. Here they will make sure it provides good value for money. In addition they should look at when and how much money you can take out, ensuring it will be sustainable and provide the right level of income for you.

Talk to independent financial advisers in Dunfermline

It is always a good idea to talk to an IFA if you have any queries about a pension. This could be making your first steps to ensure you have the right plan in place for the future or looking at how you can draw money out of it when you retire. Whatever the case, IFAs will prioritise your interests and ensure you get the best value.

Find it Near Me can help you to build a relationship with an expert adviser. This is the best way to find independent financial advisers in Dunfermline and other parts of Scotland. You can rely on us to choose someone who will give you the best deal, including clear annual fees and transparency with charges for other services. You can also contact us for help.