Understanding the different Pension & Investment Charges

Initial & Ongoing Service fees:

Pension and Investment fees are made up of Initial and Ongoing Servicing fees.

Initial fees are charged by advisers and are charged for the following main reasons:

1) The initial fee covers any administration done for the client prior to, during and after the initial client meeting. Completing research and producing documentation in a method that fits the required regulatory rules.

2) Business related costs – All businesses have overheads that they need to cover, and financial advice firms face the same costs such as wages and rents. However, financial services firms face large regulatory costs and professional indemnity costs, these increase in proportion to the size of the firm and therefore, have a direct cost when new business and new clients are taken into the firm. Initial fees cover these additional costs to the company and ensure that they can continue to provide advice to the best standard whilst also protecting their clients under the regulatory requirements.

Learn more about Veracity Financial Planning’s transparent fee structure here.

Initial Fees –

  • Initial Advice Fees – Veracity Financial Planning charges a fixed initial fee of 1% with a cap of £2,500, in comparison other advice firms generally charge initial fees that range from 1% to 3% (although there may be other formats) which often don’t have a cap. This is charged as a percentage of the amount you are investing.
  • Initial Specific Fund Fees – This used to be common when investing with a single fund provider but is less common today. This fee is charged by the funds themselves that you invest in – Whilst some funds still do charge initial fees, we generally invest our clients with funds which don’t charge initial fund fees because the platform or provider is big enough to have negotiated no fees with the funds.
  • Initial Provider Fees – This used to be common when investing with providers. The provider would charge an initial fee, however, whilst some providers may still charge an initial fee, generally, we invest our clients with providers who don’t charge an initial fee.

Speak to a qualified adviser to discuss your pensions and investments.

Ongoing Annual Servicing fees

There are always ongoing fees when investing in stocks and shares, just as there are ongoing costs when investing in, for example property, and these are always split into three categories; Advice Fees, Fund Specific Fees, Provider Fees:

– Annual Advice fees – 
These are fees made by the adviser, if you have one. An adviser charges this fee to ensure you are invested sensibly and continue to be invested sensibly over time, they should also report regularly to you to keep you abreast of necessary information, be available for any advice required and deal with any administration and paperwork required on your behalf.
– If advice is required, these fees generally range from 0.5% to 1.00% (although there may be other formats) – our annual fees are 0.5% per year.

– Annual Provider Fees – These are fees set by the provider of the pension or investment. Each different provider will offer their own system for clients and adviser firms to arrange, view and manage the pension or investment. Provider fees generally range from 0.15% to 0.50%. These are usually dependent on how much a client has invested with the provider – on average our provider fees are between 0.15% and 0.30% per year.

– Annual Specific Fund Fees – Managed funds are run by fund managers. The specific fund fee will depend on which fund you are invested in and is charged by the manager for their expertise in their field. The difference between a successful fund manager and an unsuccessful fund manager can make a big difference to the value of your pension or investment over time.
A successful manager may charge more than an unsuccessful manager and there are funds run by computers which follow ‘indexes’ rather than being ‘managed’ which are consequently much cheaper.
 Annual specific fund fees generally range from 0.10% to 1.00% – this will depend on whether you prefer to invest in more expensive funds or cheaper funds and whether you feel paying more for funds will give you better returns.

We offer and discuss with you funds with all levels of low to high costs, the benefits and drawbacks of each type using historic analysis. However, you can select either style of investing.

You should be aware that ‘older’ pension and investment products that are still in force might have been arranged before some regulations were made, this might mean certain fees are not shown explicitly but combined into one overall cost instead.

Ask an adviser to review your existing pension or investment products to see what fees you are paying and how we may be able to save you money on fees and provide a potential increase on your returns.

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Picture of Woody Snapper

Woody Snapper

Woody works with individuals and business' looking for corporate finance, high net worth mortgages, complex loans, bridging loans and development finance.

To contact Woody.

Tel: 07922 413586


Email: woody@veracityfp.co.uk