Adviser charging/fees

A pension scheme can pay a financial adviser for advice given to a member of that scheme. This payment can cover advice, implementation costs, and administration fees.

1. Key Rules

For the payment to avoid unauthorised payment charges, these conditions must be met:

1. It results from a genuine commercial arrangement between the member and adviser.
2. The adviser’s remuneration is appropriate for the service provided.
3. The service relates to the pension scheme in question.

Important: Adviser charges taken from a pension must only relate to advice on that pension. They cannot cover advice on:

1. • Other financial products (e.g., ISAs, investments outside the pension).
   • Different pensions held by the member. If advice covers multiple products or pensions, the charge taken can only apply to the part of the advice that related to the pension otherwise it will be an unauthorised payment..

2. Adviser Charging on Retirement

Annuity Purchase

• Adviser charges deducted from an immediate annuity can only relate to advice that led to the annuity purchase.
• Any advice on funds left in the pension after the annuity purchase must be charged separately and cannot be included in this deduction.
• Tax-Free Cash Impact: Adviser charges should always be taken after tax-free cash has been paid from the annuity provider before the purchase of the annuity. If the charge is taken before the annuity is set up and tax-free cash is calculated, the overall fund value will drop, reducing the amount of tax-free cash available.

Income Drawdown

• Adviser charges should always be taken after tax-free cash has been paid. If the charge is taken before drawdown is designated and tax-free cash is calculated, the overall fund value will drop, reducing the amount of tax-free cash available.

3. HMRC Guidance

For full details, see here