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    • GDB2222
    • By GDB2222 17th Apr 17, 11:47 AM
    • 13,724Posts
    • 72,974Thanks
    GDB2222
    Final Salary Pension Transfers Mis-Selling Scandal No. 2?
    • #1
    • 17th Apr 17, 11:47 AM
    Final Salary Pension Transfers Mis-Selling Scandal No. 2? 17th Apr 17 at 11:47 AM
    https://uk.yahoo.com/finance/news/apos-swap-pension-1m-apos-063732409.html

    I won't quote the whole thing, but :

    "The City watchdog, the Financial Conduct Authority, has intervened and blocked over 50 advice firms from performing pension transfers.

    A spokesman for the FCA would not say what the firms had done wrong, but pension experts say today’s environment is reminiscent of the pension mis-selling scandal of the Eighties and Nineties when millions were wrongly advised to opt out of generous workplace pensions.

    Billions of pounds of compensation were paid out as a result.

    Tom McPhail, of Hargreaves Lansdown, the pension and investment firm, said: “There is a lot of inappropriate advice being given. Some investors will lose their money, and I expect the regulator to come down hard. We’ve seen this before.”"
    No reliance should be placed on the above! Absolutely none, do you hear?
Page 2
    • GDB2222
    • By GDB2222 18th Apr 17, 2:32 PM
    • 13,724 Posts
    • 72,974 Thanks
    GDB2222
    That was an example of the ranges you asked about.

    The actual ranges would depend exactly what you were invested in within your pension.

    Here's the FTSE All share for the past 30+ years total return (including dividends) each year separately compared with the previous.

    12.5
    -2.5
    -2.1
    16.7
    8.2
    -6.7
    10.9
    25.0
    -32.8
    2.0
    13.2
    18.1
    9.2
    16.6
    -25.0
    -15.4
    -8.0
    21.2
    10.9
    19.7
    11.7
    18.5
    -9.6
    23.3
    14.8
    15.1
    -14.3
    30.0
    6.5
    4.5
    22.1
    12.5
    -2.5

    Average is about 11% but then deduct inflation,whatever that was for each year, good luck with that but that could make a big difference in some years, eg if it shows a rise of 5% but inflation was 10% in that year thats actually a loss of 5%. So all these figures need decrementing by a certain amount.

    AND - its HUGELY unlikely your pension would have been invested wholly in that. It would have had several other constituents which would in some years have mitigated decreases and in others emphasized them. The only way to know what is was would be to take what your pension would have been invested in and work it out. Add on top currency fluctuations if you had overseas funds.

    And, since past performance is no guide to the future, even if you could work all that out, it wouldn't help you anyway.

    So, back to my original point, I think plus or minus 25% is a fair approximation of what you might expect.
    Originally posted by AnotherJoe
    You say the average of those FTAS figures is 11%, but my calculation is 6.8%.

    But that's a straight arithmetic average, which is wrong for this purpose. (It's wrong because -30% one year needs +43% the next year to get back to the original level.)

    The correct approach is a geometric average, which is 5.7%. Not a million miles from the 4% that GSP is mentioning.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • AnotherJoe
    • By AnotherJoe 18th Apr 17, 5:31 PM
    • 6,295 Posts
    • 6,661 Thanks
    AnotherJoe
    You say the average of those FTAS figures is 11%, but my calculation is 6.8%.

    But that's a straight arithmetic average, which is wrong for this purpose. (It's wrong because -30% one year needs +43% the next year to get back to the original level.)

    The correct approach is a geometric average, which is 5.7%. Not a million miles from the 4% that GSP is mentioning.
    Originally posted by GDB2222
    Fair enough, when i dragged down in a spreadsheet it gave 10.79 but as you point out thats the wrong thing to do.
    • davieg11
    • By davieg11 18th Apr 17, 11:08 PM
    • 206 Posts
    • 86 Thanks
    davieg11
    Davieg are those the 'raw' performance figures of that fund or do they include your contributions?
    Originally posted by AnotherJoe
    I took a note of those percentages when I logged into the account on February so that I can keep track every year and compare them to my Royal London pension. As far as I know it's the raw performance figures for that particular fund. I'll be expecting my IFA to get better returns for me over the long term in my Royal London pension or there will be no point in paying for him.
    • Bootsox
    • By Bootsox 19th Apr 17, 7:16 AM
    • 169 Posts
    • 104 Thanks
    Bootsox
    I took a note of those percentages when I logged into the account on February so that I can keep track every year and compare them to my Royal London pension. As far as I know it's the raw performance figures for that particular fund. I'll be expecting my IFA to get better returns for me over the long term in my Royal London pension or there will be no point in paying for him.
    Originally posted by davieg11
    ...and that may well be the case.

    It will be the respective fund manager who will try to get those superior returns, although I think most of them struggle to beat the general market.

    Hence the burgeoning market in low cost tracker funds.

    Choosing a good fund manager is like taking a punt on someone taking a punt.
    • AnotherJoe
    • By AnotherJoe 19th Apr 17, 4:04 PM
    • 6,295 Posts
    • 6,661 Thanks
    AnotherJoe
    You say the average of those FTAS figures is 11%, but my calculation is 6.8%.

    But that's a straight arithmetic average, which is wrong for this purpose. (It's wrong because -30% one year needs +43% the next year to get back to the original level.)

    The correct approach is a geometric average, which is 5.7%. Not a million miles from the 4% that GSP is mentioning.
    Originally posted by GDB2222
    OK, my bad I copied the wrong numbers in, that was without dividends.

    With dividends they should have been (this is going back in time, the 16.75 is for 2016)
    16.75
    0.98
    1.18
    20.81
    12.30
    -3.46
    14.51
    30.12
    -29.93
    5.32
    16.75
    22.04
    12.84
    20.86
    -22.70
    -13.30
    -5.90
    24.20
    13.80
    23.40
    16.70
    23.90
    -5.80
    28.40
    20.50
    20.80
    -9.70
    36.10
    11.50
    8.40
    27.20
    16.75
    0.98


    I've "gone back to basics" on those numbers, calculated the gain or loss each year starting at the bottom and carried it forward, I make it 9.63% compound over the 33 years. (start at 100, end up 2082)

    Cant find any stats online to say if thats correct for the FTSEA (generally the stats are just the raw numbers without dividends).

    (And thats why I made the the straight average of those numbers 11% and you 6%. Shows the power of dividends looks like they are about 50.50 growth/dividends for this set of shares)
    Last edited by AnotherJoe; 19-04-2017 at 4:22 PM.
    • hyperhypo
    • By hyperhypo 20th Apr 17, 1:01 PM
    • 42 Posts
    • 5 Thanks
    hyperhypo
    Marco's dilemma at age 37 with such a sizeable CETV value looks very tempting , given presumably another 20 years plus before he can get his hands on it.

    I had similar experience recently, older (57) witha CETV of over £400k ....a TVAS analysis didn't to me seem very convincing but the IFA who produced it would have readily agreed to proceed.

    What concerned me was that the analysis avoided any comment on whether it was a good idea ...the numbers in themselves weren't particularly convincing.

    Whilst it would have been tempting to combine the transfer with an existing accumulating sipp, i sought a second opinion from another IFA who essentially thought it was very much not a good idea to give up a db scheme when no other signficant funding source was in place. That point appeared not to have been given much weighting from my first consultation.

    However, have seen colleagues with much larger CETV values, and cash savings, spouse in db scheme, where it appears to make a better case.

    For my part to transfer would have involved all eggs in one basket, with insufficient cash outside to allow for any recovery period. And decided not to proceed.
    • sandsy
    • By sandsy 20th Apr 17, 1:25 PM
    • 1,087 Posts
    • 622 Thanks
    sandsy
    Marco's dilemma at age 37 with such a sizeable CETV value looks very tempting , given presumably another 20 years plus before he can get his hands on it.

    I had similar experience recently, older (57) witha CETV of over £400k ....a TVAS analysis didn't to me seem very convincing but the IFA who produced it would have readily agreed to proceed.

    What concerned me was that the analysis avoided any comment on whether it was a good idea ...the numbers in themselves weren't particularly convincing.
    Originally posted by hyperhypo
    The TVAS analysis is nothing more than a numeric analysis of the rate of growth needed to match the estimated benefits of the DB scheme, using a load of assumptions. It's not supposed to have any comment.

    The suitability letter from the adviser is where you should find commentary which takes into account both the TVAS and other factors, such as your attitude to risk, any other assets etc, and ultimately should provide a clear recommendation of whether it's likely to be in your best interests to transfer or not.
    • marco_79
    • By marco_79 20th Apr 17, 9:20 PM
    • 187 Posts
    • 122 Thanks
    marco_79
    The TVAS analysis is nothing more than a numeric analysis of the rate of growth needed to match the estimated benefits of the DB scheme, using a load of assumptions. It's not supposed to have any comment.

    The suitability letter from the adviser is where you should find commentary which takes into account both the TVAS and other factors, such as your attitude to risk, any other assets etc, and ultimately should provide a clear recommendation of whether it's likely to be in your best interests to transfer or not.
    Originally posted by sandsy
    Does the suitability letter from an IFA cost money or is it only when you go ahead that you pay??
    Smile and be happy, things can usually get worse!
    • dunstonh
    • By dunstonh 20th Apr 17, 9:52 PM
    • 87,676 Posts
    • 52,909 Thanks
    dunstonh
    Does the suitability letter from an IFA cost money or is it only when you go ahead that you pay??
    Originally posted by marco_79
    That is issued at the end. You would have signed your fee agreement before that is issued.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Malthusian
    • By Malthusian 21st Apr 17, 9:12 AM
    • 1,973 Posts
    • 2,828 Thanks
    Malthusian
    Does the suitability letter from an IFA cost money or is it only when you go ahead that you pay??
    Originally posted by marco_79
    Depends on what you agree with the IFA. Realistically, if you walk into an IFA's office as a stranger and say you want advice on whether to transfer out of DB, they will charge you for the advice and the suitability letter even if it says "do nothing". And in fact they *should* charge you for the advice, as if they only charged you if you transferred out, they are biased towards telling you to transfer out.
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