Cheap "guaranteed" pension

EdInvestor

New pension plan has a third of the money in cash, a third in a fund linked to house prices and a third in a stockmarket fund organised like a GEB.

It features very low charges. Capital is guaranteed.


Sunday Telegraph

macca64

Just had a quick read of the article. The 3rd of the fund that is linked to the FTSE 100, does not include dividends, so you miss out on that, which makes up a lot of the annual growth of the Stock market.

So maybe not that good for younger people, but maybe worth it for older people nearing retirement who are looking for a guarantee.

Steve

cheerfulcat

Hello, Edinvestor

It's every bit as bad as a Guaranteed Equity Bond - I wouldn't touch it with a bargepole! And how can they call it a pension when it has a term of ten years? What happens when the investment matures? Who would keep one third of their long term investment in cash ? The worst thing is the quote from the company who came up with this scheme

"PS&I said back-testing of the Lifetime Account had shown that, at the very worst, investors would have doubled their money over 10 years. The best return was 164 per cent. "

Back testing is a very unreliable method of predicting future returns, and a responsible investment house would not use it to promote a fund.

Back to the SIPP, I'm afraid :-)

Cheerfulcat

dunstonh

It doesn't look very appealing.

Charges are irrelevant really as they are not making an annual management charge but not giving you the dividends. Its just a different way of taking a charge. In the same way a savings account doesnt make a charge, it doesnt mean there isnt one. (i.e. money markets/loans gives them 10%, they pay the savers 6% so that gives an indirect 4% charge).

Also, how can a lifetime account only last for 10 years? Seems a bit of a contradiction to me.

If you want that sort of investment mix, then stick 33% in a tracker, 33% in a property fund and 33% in gilts/fixed interest/corp bond funds and get all the income from it rather than this company keeping it for themselves.

Pal

What a terrible product!

Anyone know what the dividend yield on the FTSE 100 is? 4% or so? Doesn't that make this a product with an annual charge equivalent to about 1.2%?

whiteflag_3

New pension plan has a third of the money in cash, a third in a fund linked to house prices and a third in a stockmarket fund organised like a GEB.

It features very low charges. Capital is guaranteed.

IMHO you would be better in a low cost SIPP

oceanblue_3

whiteflag wrote:

IMHO you would be better in a low cost SIPP

You're right, Whiteflag, I am convinced EdInvestor should consider a low-cost SIPP. Do you know of anyone who has any details?

dunstonh

Rofl...

EdInvestor

whiteflag wrote:

IMHO you would be better in a low cost SIPP

I think you could be right whiteflag.The charges would be a lower for a start.

whiteflag_3

EdInvestor wrote:

I think you could be right whiteflag.The charges would be a lower for a start.

So what was the motivation for your original post?

Pal

whiteflag wrote:

So what was the motivation for your original post?

Perhaps EdInvestor felt it was a good idea to advertise a product that is likely to be completely inappropriate for most people?