Do I need to use a Financial Adviser to have a Royal London pension?

16 July 2021

Question by Heidi

I currently have a pension pot invested through a financial advisor with Royal London. I am concerned at the ongoing cost of his services, approx £1100 plus the cost of Royal London approx £900. 2 questions: do I need to use a FA to have a RL pension? 2) Is something like vanguard LS a good plan with much less cost? Bearing in mind that over £2k is beating take in fees annually.

Answered by James Greenly

Hi Heidi

It’s difficult to comment on whether adviser charges of £1,100 a year represent good value without a) knowing exactly what your adviser is doing to earn that fee, and b) knowing the current value of your pension pot.

For the purposes of answering your question, I will assume your adviser is charging 1% a year (which is pretty standard across the profession) and that your pension pot is worth £110,000.

I’ve done some research for you, and it appears that Royal London only offer their pensions through financial advisers, therefore it looks as though you would need to move it to a different provider if you were to sack your current adviser.

You could move your pension over to Vanguard into their SIPP, and they offer competitive charging (on a pension pot of £110,000 the annual fee is 0.15%, so £165 a year). Remember though that you will also have the charges of any investment funds on top. You mention Vanguard Lifestrategy, so let’s assume you pick one of those funds. They have charges of 0.22% a year, so £242 on your £110,000 pot.

All in, if you wanted to ‘DIY’ the pension with Vanguard you’ll be looking at around £407 a year (0.37%) – half that of Royal London.

This is not a recommendation, and you should always do your own research (Boring Money have done lots of comparisons in this area), however they do offer a very low-cost solution for people that feel comfortable and have the knowledge to manage their own pension.

As a financial adviser myself, I would urge you to have a candid conversation with your adviser before making any decision to move away. There could be a very valid reason that he feels Royal London is the best place for your pension pot.

I’m not sure what life stage you’re at, but if you’re close to or at retirement, working with an adviser can be very valuable as he will be able to create you a sensible income strategy, that can be stress tested to ensure that you don’t draw down too much from your pot and risk running out of money.

If you’re working and still building up your fund, then you can probably get away with going down the ‘DIY’ route, just as long as you know how much you need to be putting aside of the future, and you get the pension invested in the right way.

I hope this helps, please feel free to reach out if you need any further help.

Answered by

James Greenly

Chartered Financial Planner

I am a Chartered Financial Planner at Capital Asset Management, a boutique financial planning and wealth management firm based in the City of London.