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Pension Comparison (one for the mathematicians)
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farley88
Posts: 8 Forumite
Hi,
My current work pension provider is suggesting I consolidate my pensions from previous employers into one scheme. The fees for the current provider are somewhat higher than the old provider, requiring the new provider to outperform the old in order to get even the same returns.
So, to make a case they have tried to convince me on past performance that they have done this. However, the maths that have been used to justify this seem to me to be spurious to say the least. Considering that this is pension company giving supposedly independent advice, I am wondering whether I need to make a formal complaint... you decide...
The justification given has basically been this
New provider, average fund performance (example)
1 yr - 25%
3 yr - 90%
5 yr - 50%
Old provider
1 yr - 20%
3 yr - 70%
5 yr - 65%
OK so far? Right then... the comparison calculation given was basically
'Total 5 Year Return' [sic] for New : = 25+90+50 = 165%
'Total 5 Year Return' [sic] for Old : = 20+70+65 = 155%
Difference over 5 years = 10% in favour of New provider
=> New provider on average outperforms old provider by 10/5 = 2% pa
Now, even with my limited maths the holes in this calculation seem wide enough to sail a car ferry through sideways. (Hint: if I invested £100 with both 5 years ago, which would be worth more? and that's just the start of it). However, if it is that obvious then I don't need to go into details; but, if anyone DOES see the logic in this and thinks this has merit then please say so..!
Perhaps it's just too late at night for me to think straight...
Cheers
Farley88
My current work pension provider is suggesting I consolidate my pensions from previous employers into one scheme. The fees for the current provider are somewhat higher than the old provider, requiring the new provider to outperform the old in order to get even the same returns.
So, to make a case they have tried to convince me on past performance that they have done this. However, the maths that have been used to justify this seem to me to be spurious to say the least. Considering that this is pension company giving supposedly independent advice, I am wondering whether I need to make a formal complaint... you decide...
The justification given has basically been this
New provider, average fund performance (example)
1 yr - 25%
3 yr - 90%
5 yr - 50%
Old provider
1 yr - 20%
3 yr - 70%
5 yr - 65%
OK so far? Right then... the comparison calculation given was basically
'Total 5 Year Return' [sic] for New : = 25+90+50 = 165%
'Total 5 Year Return' [sic] for Old : = 20+70+65 = 155%
Difference over 5 years = 10% in favour of New provider
=> New provider on average outperforms old provider by 10/5 = 2% pa
Now, even with my limited maths the holes in this calculation seem wide enough to sail a car ferry through sideways. (Hint: if I invested £100 with both 5 years ago, which would be worth more? and that's just the start of it). However, if it is that obvious then I don't need to go into details; but, if anyone DOES see the logic in this and thinks this has merit then please say so..!
Perhaps it's just too late at night for me to think straight...
Cheers
Farley88
0
Comments
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Hi farley88
Who are the old and new
providers?0 -
I'd prefer not to say, unless you think it's relevant? The old provider is an established UK firm, the new provider is more of a niche player.0
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I'd prefer not to say, unless you think it's relevant
Probably make it easier to understand how your "advisers" are trying to justify the change0 -
(Hint: if I invested £100 with both 5 years ago, which would be worth more? and that's just the start of it
Quite so.
What are the comparative charges?Trying to keep it simple...
0 -
farley88 wrote:Considering that this is pension company giving supposedly independent advice, I am wondering whether I need to make a formal complaint... you decide...
Confused about the relationships here
If this adviser has been appointed by the company to give the company advice on pensions, then they are not authorised to give you advice. In order to give you advice, YOU must appoint them as your adviser.
Secondly, you say that this "advice" is coming from the pension provider. If so, then they will almost certainly NOT be giving you independent financial advice. You need an authorised IFA for that.
Has this "adviser" issued you with their terms of business? What do they say about his role?Warning ..... I'm a peri-menopausal axe-wielding maniac0 -
Old - 1%
New - 1.7%+0 -
Old - 1%
New - 1.7%+
Forget it. That's a joke.
It's not St James's Place is it?Trying to keep it simple...0 -
To debt_free_chick
This is something I realise I need to clarify. The new provider, as well as managing my pension, has also provided financial advice on critical illness insurance and the like, for which, I appreciate, they take a cut. He has kind of become my de facto financial adviser as this is part of their service, e.g regular financial healthchecks. Where I did buy insurance, I did satisfy myself that I was getting a good deal through independent checks.
Another complication that I didn't make clear is that this is actually no longer my active pension to which I'm contributing, we changed provider last year due to administrative difficulties. Therefore he is advising on a legacy pension fund, not my active one.
When I used the term 'independent' I guess that was a misleading term - the adviser is not an IFA. However, I assume that he still has a responsibility to provide balanced advice, and not just blatantly plug and hype their own products. My concern here is that he has superficially tried to do this by giving me 'facts' so I can make up my own mind, but the 'facts' are very questionable.0 -
To EdInvestor.... bingo!0
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And since that's out of the bag, the 'old' provide is Scottish Equitable0
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