We explained MERs in the article; Fees for UK to New Zealand Pension Transfer, but there are other factors to consider when you’re choosing a financial adviser in order to transfer your pension from the UK to New Zealand.
When you invest your money, some parts of your portfolio will do well and other parts won’t do so well. This is why your investment needs to be diversified. You won’t get fantastic returns nor will you get devastating losses.
PROTECTING YOU AGAINST SHARE MARKET TROUGHS
The reason investment portfolios include income earning assets, such as fixed interest and term deposits, is to protect you against dramatic changes in the share markets. When share markets do exceptionally well (or exceptionally poorly), your funds will become out of balance and they’ll need to be re-weighted.
What if the advisory firms that charge no fees to transfer charge 1% every time they sell shares on your behalf, and again every time they purchase new shares or other investment assets for you?
Some other funds only charge 0.1% to 0.3% on these necessary trades. It gets very expensive if you’re paying ten times more than you need to.
Before you make the decision to transfer your funds, you should request to read up-to-date independent research on the performance of the pension fund being recommended and how it compares with the performance of similar funds. If you find that your recommended investment has consistently performed in the bottom quartile – flee!
You should also ask for a breakdown on the cost of the MERs and the Buy Sell Spreads.
THE IMPORTANCE OF CHOOSING AN INDEPENDENT INVESTMENT ADVISER
An independent investment adviser charges fees only. They are not required to meet a quota, or only recommend certain funds. They will not be paid by the fund manager, rather, they will be paid by you on a monthly basis via your investment fund. You will have full disclosure. When fees are visible, they are tax deductible.
In conclusion, when transferring your pension to New Zealand, you want to ensure that you have:
Reasonable and consistent investment performance.
- Fair MERs.
- Low Buy/Sell spreads.
- An investment adviser whom you feel has your interests at heart and with whom you feel safe.
- An investment plan that is in line with your expectations and investment philosophy.
You are likely to have your investments in your pension fund throughout your retirement, so make the right decision in the first place!