O&M/Selectapension - 'Additional Growth Required' figures

Gustavo_Fring

Hello, I’d be interested to get some feedback on how people use the AGR figure from O&M and SelectaPension Pension Switching Reports.

 I’ve got no issue recommending a more expensive replacement, as long as we have the justification (i.e. needs access to drawdown, wants access to ethical funds etc.) but there must be a point where you draw the line, or at least start questioning the viability of a transfer.

 When do alarm bells start ringing for you? As soon as an additional return is required? Greater than 1%? Greater than 2%? I guess client’s attitude to risk would need to be factored in too. I’m thinking of creating a type of matrix, although not really sure where to start so I’m currently at brainstorming stage!

richallum

I've seen a matrix work well as a starting point where it uses AGR, term & risk as metrics.  It's always a starting point though.  If you're in a dog 226 with only a with profits fund at 0% bonus and 'no' charges with one of those wonderful projections, I wouldn't have an issue with an AGR of say 2% if it included FAD, decent portfolio and 1% pa service fee.

Gustavo_Fring

Yep - absolutely agree and the AGR shouldn’t be the sole driver for a recommendation to transfer or retain. I think the cases where it would come in handy is something like a proposed consolidation of say, 3 x Personal Pensions of reasonable quality for the usual reasons of simplicity, ease of admin etc. At what point do you think. I know the client wants these tidied up, but the AGR is too prohibitive to make it worthwhile?

benjaminfabi

I'd say that as soon as it costs more then you need to start documenting why the extra cost is worth paying. If you are recommending something that is so much more expensive than what they already have then you have to start asking whether what you're offering is providing value in the first place.

And ultimately, the adviser/business owner has to be prepared to accept that sometimes a plan won't be worth the client moving. That can bring commercial conflict into the suitability process very quickly.