New pension - Waiver of Premium?

ginvzt

Hi,

I have started a new job 3 months ago and I am finally getting my pension sorted. The new scheme is with Scottish Equitable and I will be getting employers contribution of 6.5% if I put it 2.5%, which is fine with me. I have another pension from my previous job with Scottish Life and was thinking to keep that one alive and pay in a fixed sum a month, so that I 'don't have all of my eggs in the same basket'. I am 28, and it is along way to go still.

There is an option with the new pension to take out "Waiver of Premium". This would pay pension contributions if I was off work due to accident or illness for more than 6 months.This would result

"in around 2.5% of your contributions each month being deducted to pay for this insurance and would need to answer health questions and possible go for a medical"

Do you think this is a useful addition? Or just another way for the pension provider to make money? The details were not provided, but the pension adviser, that came to talk to me had it all put in the form 'assuming I want it". She was rather unhappy when I said I am not filling the pension forms there and then and I will decide it later.

Also, any suggestion of which fund should I choose? They have defaulted to 'Universal Lifestyle collection'. (I didn't like that they basically filled the form out and just wanted me to sign - that is one reason I didn't do it in front of her!)

dunstonh

so that I 'don't have all of my eggs in the same basket'.

The provider makes no difference whatsoever. Its the investments within the pension where you diversify.

Do you think this is a useful addition? Or just another way for the pension provider to make money?

Its useful if you have to make a claim but like any insurance, it also makes money for the provider. Personally, I am not a big fan and would rather capture income protection under a standalone income protection plan.

Also, any suggestion of which fund should I choose?

Single fund investing is old fashioned and will lead to lower returns in the long run. You mentioned you dont want your eggs all in one basket and this is where you take care of that.

They have defaulted to 'Universal Lifestyle collection'. (I didn't like that they basically filled the form out and just wanted me to sign - that is one reason I didn't do it in front of her!)

Is the person you saw just admin person? If it was an IFA they would pick the funds for you after working out your risk profile. They probably wanted you to sign it there and then as it saves time.

ginvzt

The person I saw said they can't advise me as they are paid by the company! She was supposed to be IFA, but I can't confirm that. She was very bazaar, especially when I started asking questions. The annual management fee is 1% with this pension, and is considerable higher than in 'old' pension, that is another reason why I am thinking to keep them separately. Also, (this makes no difference to my decision), the lady I saw suggested not to transfer (Don't they want to make more money? I know, it is not a huge amount, but still - nearly £4k...)

Pontebantam

1% as an AMC is not considered high (although it may be higher than your Scottish Life pension). Is it a Stakeholder ? My only problem with these sorts of pensions is that they can be very restrictive as to where you can invest your money (limited fund choice). If they only allow investment into internal funds (rather than external such as Invesco Perpetual, BlackRock etc) then the actual performance isn't always that good. One should always be wary of giving too much credence to the AMC, a low annual charge isn't any consolation if the underlying funds are dogs!

And I completely agree with dunstonh, I would expect the 'adviser' to chat to you about your risk profile before recommending a fund, especially one of these 'all in one' Lifestyle funds.

ginvzt

I have just looked through the list of available funds and Invesco Perpetual (Balanced Managed, Stockmarket Managed, Income) and BlackRock (Balanced Managed,Olympian Growth,UK, UK smaller companies, etc) are available. Of course, AMC for any of these is higher (1.25-1.95%). Oh well, I will need to take my pick, I suppose!!!!

dunstonh

The person I saw said they can't advise me as they are paid by the company! She was supposed to be IFA, but I can't confirm that.

Clearly not an IFA from what you say there. IFAs have to recommend the funds. Its part of our remit. Only tied reps of insurance companies put the choice in your hands (or the administrators of the pension).

The annual management fee is 1% with this pension, and is considerable higher than in 'old' pension, that is another reason why I am thinking to keep them separately

Was a proper analysis done comparing projections on a like for like basis? It doesnt really sound like it which again doesnt sound like an IFA.

ginvzt

Thanks for answers!!!!
I have the projections of what am I likely to have if I invest the standard 2.5% and assuming the investments grow at 5/7/9% and interest rates when I retire are 2.1/4.1/6.1% respectively. It also compares the possible pension with the would be salary assuming the salary grows at 2/4/6%. It then says what my pension would be worth in todays money if inflation rates remain at 0.5/2.5/4.5%. But it doesn't pick a specific fund or show the difference what would happen if I decided to invest more tahn 2.5% (the previous pension provider showed different investment levels).

Sun

Did you choose any other funds, I am about join same but looking for suggestions on other funds...

ginvzt wrote: »

Also, any suggestion of which fund should I choose? They have defaulted to 'Universal Lifestyle collection'.