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[MSE Jenny]

This thread is to specifically to discuss the content of the

Repensioning. Increase your pensions return without any risk Article

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[dunstonh]

It would be a good idea to include a reference to pensions that can have guaranteed minimum pensions, guaranteed minimum values and guaranteed annuity rates. Transferring or repensioning would result in these valuable benefits being lost if they existed before.

Also, under post April 2006 rules, anyone with primary or enhanced protection on their pensions would lose the protection if they did this transaction.

Finally, there are a number of schemes that pay enhancements based on years the policy is held. Those repensioning would see their times reset. Scottish Widows and Scottish Equitable are two examples that immediately come to mind of where you could lose more than you gain. Norwich Union with profits fund holders in the CGNU WP fund could also lose benefits with a planned dispersal of orphan funds in 2008. A new policy would lose the right to the special bonus.

The theory is good but a couple of warnings wouldn't go amiss. Remember the people reading this article and likely to act on it will not be getting advice. The things above are only going to be found out when advice is sought. There are clearly risks involved despite the article saying that there are none.

[EdInvestor]

The article says:

Stakeholder pension providers aren’t allowed to impose transfer penalties, making repensioning quite easy. Rather than do anything clever, just transfer your current pension to an absolutely identical one set up by the discounter. Therefore you have an identical plan, but with new lower charges.

When stakeholder pensions started, their annual fee was capped at 1%. However a few years later, providers persuaded the Government to raise this cap to 1.5%. Some providers haven't lifted their charges, but others have, so there is a risk that any move like this could actually result in increased, not lowered charges.

A 1.5% annual charge over 25 years eats up 25% of the total pension fund, so we are talking about a lot of money.

Also, some providers have narrowed the range of funds available to new stakeholders and those available are often pretty naff, whereas earlier stakeholders may have access to a much better range.

Worth checking these issues with the discount IFA first before actioning a transfer.

[Paul_Herring]

Originally Posted by EdInvestor

A 1.5% annual charge over 25 years...

Considering we're talking about stakeholders, you appear to have forgotton that 1.5% is only charged for the first 10 years on a stakeholder taken out after April 2005. It then reduces to 1% from then on.

...eats up 25% of the total pension fund, so we are talking about a lot of money.

Would you like to have another go at this calculation?

[EdInvestor]

Would you like to have another go at this calculation?

The figure comes from the Turner report, so I assume he has taken that into account.

[dunstonh]

Thats what happens when you refer to the "effects of deductions to date column" out of context.

Actual charges do not eat up 25% of your investment. The effect of charges, if not taken and left invested and therefore get growth on them, can reduce your final fund value by around 25%.

Very much in the same way as you would have a higher balance if your bank paid you an extra 0.5% interest. However, we dont look at it as the bank charging you more by paying less interest and therefore reducing your balance by 25%.

[EdInvestor]

Actual charges do not eat up 25% of your investment. The effect of charges, if not taken and left invested and therefore get growth on them, can reduce your final fund value by around 25%.

To sum up the effect of a 1.5/1% stakeholder charge is to reduce your fund value by 25%.

[wotsthat]

To sum up the effect of a 1.5/1% stakeholder charge is to reduce your fund value by 25%.

Quite a clever one liner. However, isn't that best left to the newspapers? I can easily see how people reading this thread would think 'sod it, pensions are a rip off and a poor investment' and not save anything rather than find an alternative.

There are arguments for and against pension wrappers and plenty of people have chosen the pension route either as part or all of their pension planning.

For those people, if the effect of charges is so great, surely it's worth trying to reduce them wherever it's reasonable to do so.

[stphnstevey]

Sounds like some of the above posters could be Financial Advisers who are worried they might be losing their commissions?

As this thread is quite short, is that because no one has actually tried this succesfully? If you have, could you let us know how you got on?

I am thinking of doing this, but realise that pensions are not always as simple as it sounds. I was particularly looking forward to going to Hargreaves Langsdon brokers and asking them to find a pension whereby I could cut out the commision I pay to Hargreaves Langsdon company pension Scheme advisers.

I currently have a work stake holder pension that was arranged by Hargreaves Langsdon and provided by Standard Life.

a) Can I do anything here, seeing as it is a Standard Life pension and also a work related pension?

b) Can I move just the current contributions and leave the work related pension still open, as the company I work for contributes to the work related pension and I wouldn't want to lose this benefit?

c) Can anyone point me in the direction of a thread for buying property as a pension?

Thanks in advance!!!!!!!!

[dunstonh]

Sounds like some of the above posters could be Financial Advisers who are worried they might be losing their commissions?

I am the only financial adviser that has posted in this thread and I am not worried in the slightest.

The point is that the article states that is at no risk and that is clearly incorrect. There are risks to a number of contracts when you do this transaction.

It should also be noted that many pension contracts only pay up front commission and someone moving the pension like this isnt going to impact on those. Plus, the insurers already seem to be on to it and putting a stop to it. Norwich Union have issued new pension applications and are now asking if you already hold an NU pension. If so, the terms of the existing pension will be applied to the new pension. This now appears on their stakeholder pension application and personal pension application.

I am thinking of doing this, but realise that pensions are not always as simple as it sounds. I was particularly looking forward to going to Hargreaves Langsdon brokers and asking them to find a pension whereby I could cut out the commision I pay to Hargreaves Langsdon company pension Scheme advisers

HL's SIPP which is one of the better pension products does not refund any of the fund based commission. You could ask them to look at arranging a lesser contract like a stakeholder though.

a) Can I do anything here, seeing as it is a Standard Life pension and also a work related pension?

Possibly. If you have the property fund in your SL list, then you could lose access to that if you re-pension. Someone posted that the SL property fund is restricted in their stakeholder now and only those that have it can keep it. Repension is treated as a new contract.

b) Can I move just the current contributions and leave the work related pension still open, as the company I work for contributes to the work related pension and I wouldn't want to lose this benefit?

If the employer is paying into the contract then you cannot move it. A GPPP is not actually owned by you at this stage.

c) Can anyone point me in the direction of a thread for buying property as a pension?

Ahh, another fool trying to jump on the gravy train long after it left the station. Take a look in the house purchase forum.

[stphnstevey]

Thanks for your advice - I think my last question made you miss-understand that I had a SIPP. It's simply a company pension plan.

As for
"Ahh, another fool trying to jump on the gravy train long after it left the station. Take a look in the house purchase forum."

I have already invested in property as a form of a pension, so I am hardly 'too late'. Besides, there are still great deals still out there. However, I can see why a FA might be biased as they don't get there big fat commision from property as they do with shares/pensions.

As for a 'fool', well with a 100-50% return on my investment a year, able to use mostly the banks money to invest, house prices doubling in less than 10 yrs and the abilty to cash in at any age, able to borrow more of the Banks money on equity growth to buy more assets, able to pass entire investment to children etc etc.

Compared to ~15% at best return on investment (currently much much lower), forced into buying an annuity at there current rates, not able to touch the money till 50+ yrs old, partially taxed when receive income (tax DEFFERED, not tax free), only a partial amount of the investment going to children, if any etc etc

Put it this way, if a Bank does not have enough confidence in there own shares to lend you money to invest in their shares

But will lend you 90% of the value of a peice of dirt with a house on it, doesn't this show you what they have confidence in!!!

[dunstonh]

However, I can see why a FA might be biased as they don't get there big fat commision from property as they do with shares/pensions.

How much do i get paid for posting on these forums? zero. Please do not acuse me of bias. I have my opinions and I never shy away from saying them but they are not formed on the basis of any bias. Also, as I am a NMA IFA your accusations are not appropriate for me.

Compared to ~15% at best return on investment (currently much much lower), forced into buying an annuity at there current rates, not able to touch the money till 50+ yrs old, partially taxed when receive income (tax DEFFERED, not tax free), only a partial amount of the investment going to children, if any etc etc

A pension is just a tax wrapper and not a very desirable one at that but you are comparing car and petrol as a pension doesnt make or lose money. Its where you invest that does. Property is an investment and not a tax wrapper.

As for equities, 10-15% p.a. if done before stockmarket crash or doubled in last 3 years if done after is a fair rate of return on equity portfolios. The point on annuities is not applicable as that applies to a certain tax wrapper which has nothing to do with the method of investing.

Whilst we could debate past performance over varying periods when at times equities have been better and property other, you need to look at future potential and that is very limited for UK residential property. Rental yields are low and capital growth is likely to be limited.

There seems to be a mindset in the UK at the moment that property only goes up. Its ripe for 30% drop. Whether or not it will come or how it will come, we dont know but the indications are the future returns are not going to be like the last 8 years.

And another thing, as you commented on the taxation on the pension wrapper, you do need to consider that rental income is liable to income tax and the property liable to capital gains tax on disposal. Coupled with it being hit for 40% IHT when passing on to children on death, it isnt all a bed of roses.

Thanks for your advice - I think my last question made you miss-understand that I had a SIPP. It's simply a company pension plan.

You indicated that it was a standard life group personal pension (GPPP). In which case, you are not the owner of the scheme at this stage. The employer is. If you leave that employer, SL will "K" code the policy number and allocate it to you and you can then do what you like with it.

[Paul_Herring]

Originally Posted by stphnstevey

However, I can see why a FA might be biased as they don't get there[sic] big fat commision from property as they do with shares/pensions.

Oh dear. Not another one.

[speedtwin]

This might be a silly question but is there any savings to be made if you have a suspended pension. ive got three but i dont pay into them any more.

[Reaper]

It's not entirely related but Martin - please can we have the article on SIPPs which you have been saying is "coming in the next few weeks" or "coming soon" ever since SIPPs were launched.

[dunstonh]

This might be a silly question but is there any savings to be made if you have a suspended pension. ive got three but i dont pay into them any more.

Possibly. Older pensions tend to either be very cheap or very expensive. Often there is no middle ground. Also, if the pensions are held with closed insurance companies, you will not be able to "repension". You would need to transfer.

The other thing to be wary of is that there may be penalties on doing this. You shouldnt "repension" or transfer pensions without verifying the costs, benefits you may lose (such as GMP/GAR/GMFV) and make sure the current contract is better than the old one you have.

It's not entirely related but Martin - please can we have the article on SIPPs which you have been saying is "coming in the next few weeks" or "coming soon" ever since SIPPs were launched.

It would be nice to see. Especially if you include hybrid SIPPs which can be cheaper than HL's SIPP which usually gets remarked on.

[MSE Martin]

Sipps will be coming its on the schedule - but i can't promise when - i hope within the next two months!

[Superboy123]

So I read the article, and want to know - is there any reason why I woul dnot print off the Cavendish letter and go ahead with the repensioning process? Is there any possible downside? Why would anyone not do this, if it is such a winner?

[EdInvestor]

Originally Posted by Superboy123

So I read the article, and want to know - is there any reason why I woul dnot print off the Cavendish letter and go ahead with the repensioning process? Is there any possible downside? Why would anyone not do this, if it is such a winner?

Try reading the thread again from the top.

[Superboy123]

Not the most helpful thread. It's risk free, but might have some risk.