How much?
I was told this morning of a pension scheme that wishes to charge £2,500 to a lady who has been granted a share of her ex-husband’s pension on divorce.
This on the face of it may not sound unusual as pension schemes may charge a ‘reasonable fee’ for the arranging of a pension share.
However what does ‘reasonable’ mean?
If I tell you that the total value of the ex-husband’ s pension fund is £25,000, you will rapidly calculate that the fee is equivalent to 10% of the pension fund value.
What you also need to know is that the pension plan is actually a money purchase scheme.
I cannot see how it could possibly be reasonable to charge £2,500 to sell the underlying assets (cash, shares and collective funds for example) and transfer the 50% share to the selected new providers plan.
Unless of course you happen to have the worst administration team on the planet.
If it were a “final salary” scheme I can see how the administration might be slightly more complex but not significantly so.
A more cynical view might be that the administrators see such pension sharing orders as a bit of a “cash cow”.
The lady of course is going to have to stump up her £1,250 (costs such as these are usually shared equally between the two parties) in order to get her pension shares transferred. You have to say such a cost is, put simply, outrageous and the scheme administrators should be ashamed.
Where?
Very few people these days get the chance to become members of a “final salary” pension scheme.
So it is a bit of a delight when we are dealing with pensions and divorce to be able to say to a client “accept an internal share of your ex-spouse’s pension scheme” this may come with some restrictions about access to benefits but is usually, if it is available, the best option to choose.
After all why take on the investment risk associated with a personal pension plan, particularly if you a quite cautious investor?
Better usually to leave the funding of investment risk with the employer and enjoy the prospect of a promised pension amount.
So we were a bit surprised when asked by a Solicitor to tell us the name of the scheme to which the cash equivalent transfer should be sent for a lady who had just been given a Pension Sharing Annex.
“But, (we said) we haven’t advised her yet and anyway she is likely to be better off taking an internal share” (which the scheme documents confirmed was available to her).
We found ourselves quickly sidelined and the enquiry was passed to another IFA to deal with.
Our only hope was that this lady was not transferred to a personal pension plan. We may never know.
