Moving Pension - Is Scotish Widows a good choice?

nic333

Hi All

I have an old style pension (taken out in 1988) with Lincoln National and it makes sense to move that to Stakeholder pension where I will incur less costs and hopefully move to funds that are performing better.

I have been recommended to move to Scottish Widows , does anyone have any views on this Company.

I am 38 and I am still contracted out by way of background information.

Any thoughts, ideas welcomed.

Cheers

Nic

dunstonh

Lincoln have some plans with guarantees. There are also transfer penalties. Ask them for a projection of benefits and the current and transfer value.

Use that transfer value in a new quote with the new provider and see what the projections come to. Then you can compare them.

Cant tell what year you took yours out as a smilie has replaced it. If it is a retirement annuity contract, you may be better keeping it running depending on the terms of the policy.

Scottish widows are ok but they have no discount on their charges based on fund value. There are some differences in the fund choices available depending on where you buy the product. I recall that buying it via LTSB gives the most limited fund range. Buying direct offers a few more funds and buying from an IFA offers a few more still.

Scottish widows just won the award for having the worst funds. (the award is like the Rassies (sp?) for worst films). This is the second year in a row they won this.

DavidLaGuardia

Scot Widows depends on what funds used and rasser award fails to take this into account.
I woulsn't touch some of their funds with a bargepole and I'm not going to say they are the best company, but to counter DD's criticisms
Scottish Widows has three Excellent excellent third party funds espec. Newton Managed available through stakeholder with Scottish Widows
Plus a good Property Fund and a good Gilt fund.
Hence at least three different types of asset can be invested in to spread risk, all in funds among the best examples in their category.
If this changes in the future, the beauty of a stakeholder is that it can be moved in the future without penalty.

dunstonh

I was probably a little harsh on Scot Widows as they do have some merits but you do really have to be careful what funds to pick. One of their merits, at least on the IFA side, is the communication. I find their processing relatively quick and informative.

The property fund isnt bad but Standard Lifes has been better. Considering the relatively small difference in the fund performances in the past between the main insurance companies, I would probably have looked at a stakeholder with discounted fund charges as a preference.

The Newton managed fund is a nice addition but only created in 1999 so its track record is not significant. However, since 7/7/99, the balanced managed sector average would have returned £858 on £1000 invested. The Newton Managed fund would have returned £1143. Good start, lets hope it continues. However, you are restricted to only 30% of the portfolio in this one. Plus 25% with property leaving 45% having to go into alternative SW funds.

As i said in another Scottish Widows thread, they arent bad for smaller fund values but I wouldnt use them for larger funds.

At the end of the day, getting a decent portfolio spread over the various asset classes is more important than investing 100% into one fund that has the best track record.

As for transferring later without penatly, that may be the case now but of course, after April 2005, the stakeholder charge will go up from 1.0%pa to 1.5% for new business. So transferring then could put you in a higher charging plan. So its probably better to get it right now rather than later.

DavidLaGuardia

Fair enough, but on the 1999 comment, that's ample time for a fund. Even if a fund has been going for ten or fifteen years the performance before the last three may be largely irrelevant. Especiially as fund managers change.

nic333

Thanks for the input to my first post.

The fund choices I have been offered seem quite sound with two of the external funds that seemed to have performed well to date, property plus one other. However, it was the fixed charges of 1% with no prospect of discounts over the 27 years I am potentially paying in that initially alarmed me.

It seems to base a decision on fund performance alone would be a mistake as this is the one area that is not guaranteed.

The only area that you can be certain about are the charges and to save money here would seem to be sensible if you can combine that with a reputable organisation and a sensible spread of funds.

Cheers

Nic

dunstonh

The only area that you can be certain about are the charges and to save money here would seem to be sensible if you can combine that with a reputable organisation and a sensible spread of funds.

With 27 years, it may well be worth investigating a Scottish life PPP or a Skandia PPP. They have alternative charging structures to a stakeholder and can provide lower charges over the term.

A 1.0% annual charge stakeholder will have a reduction in yield from 7.0% to 5.9% over the term. A provider with discounted fund charges (such as NU, Cler Med, L&G) will typically have a reduction to 6.0%. So its only 0.1%pa. Not really a big deal to be honest.

The Scot Life PPP with 27 years would give a reduction in yield down to 6.3% Now thats better. Skandia (in their default fund) would be about 6.2%. Although Skandias external funds tend to average an additional 1-2%pa management charge. However, my view is that they are worth it. I wouldnt really look at the skandia default fund though.

I wouldnt get too concerned over the 0.1% though.