Pension Help

Tesmondo

I plan to retire in 15 years. I currently have a personal pension with Allied Dunbar/Zurich which is managed - acc managed/capital managed - and is currently worth 20,000 - transfer value 17,800 (con or what?). How would this pension rate. Are the charges very high, high enough to bite the bullet and opt either to a stakeholder or sipp. Went to an IFA but was not overly impressed (seemed to be too worried about how much to charge me). If any more info is needed only too willing to oblige.
Cheers.

dunstonh

How would this pension rate.

It has high contribution charges but low annual management charges (generally. As there were more than one version). An average fund range. Switching and redirecting future contributions can often be considered a better option but then again sometimes transferring can as well. Only can tell after a proper transfer analysis has been completed (TVAS)

Are the charges very high, high enough to bite the bullet and opt either to a stakeholder or sipp.

Dont forget personal pension and hybrid SIPPs as possible alternatives. The stakeholder and SIPPs are at opposite extremes with the other two in the middle.

Went to an IFA but was not overly impressed (seemed to be too worried about how much to charge me).

It is a regulatory requirement to place the discussion on fee options etc at the start of a meeting with an IFA. So whilst you see that as an issue. I see that as positive that he was positioning this correctly with you as he should.

I would say that based on what you have said, you dont appear to understand what you have and whether its best to keep and continue, keep but redirect elsewhere, switch funds or transfer outright. Then you have only mentioned stakeholder and sipp as possible alternatives and not the other two options (or three if you include ISAs). Plus you havent covered off what sort of investments you want and what your risk profile is.

There is nothing wrong doing it yourself. It can be cheaper. However, why isnt everyone servicing their own cars if that is the case? Sometimes you need the service of an IFA to make sure it is being done right.

margaretclare

dunstonh wrote:

There is nothing wrong doing it yourself. It can be cheaper. However, why isn't everyone servicing their own cars if that is the case?....

....or delivering their own babies or taking their own appendices out....

Sometimes you need the service of an IFA to make sure it is being done right.

I agree. However I would prefer to know a little more about my investments than the OP appears to. DYOR is advisable.

Margaret Clare

Tesmondo

Thanx for the prompt replies
1. IFA cost 1200. Is this normal.
2. If I stopped the pension would annual charges just chip away at it.
3. Isa appeals as pension tax saving is just deferred.
4. Medium risk.
5. Research starts here and hopefully with a few pointers in the right direction I will be able to choose wisely.
6. Advice much appreciated.

dunstonh

1. IFA cost 1200. Is this normal.

For doing what?

A regional accountant near me has their IFAs charging a minimum of £2500 per transaction. Others charge by the hour, others have fixed fees which you can negotiate.

On face value I would say that you can quite easily get it cheaper or it may be that commission is the cheaper option for you in this case. Commission would be around 4.5% of the fund value (assuming no discounts). Your fee is around 6%. However, were there any other transactions that may have taken place included in that?

2. If I stopped the pension would annual charges just chip away at it.

Yes they would but if the annual management charge is 0.8% (as the last Zurich one I reviewed was) and the growth is 7% p.a, then you are still increasing by 6.2% p.a.

3. Isa appeals as pension tax saving is just deferred.

Yes and no. A pension gets tax relief on 100% of the contribution. At commencement of benefits you can take 25% tax free leaving the remaining 75% liable to taxation. However, you have the personal allowance of £7090 (currently) at age 65 and then a further £2090 at 10% tax. So, its not 100% deferred.

4. Medium risk.

Is that with a portfolio that averages out to medium risk (by using funds above and below in addition to medium) or only with funds that equal medium risk?

5. Research starts here and hopefully with a few pointers in the right direction I will be able to choose wisely.

Well, you need to complete a TVAS to compare the pensions. A analysis of the funds available within the scheme which may result in a switch of funds being better than a transfer. If not you need to look at the alternative options (114 providers available for personal or stakeholder. Not including funds or SIPPs). Decide which features are appropriate to you and which are not and which offer the funds that suit your goals.

The FSA issued a guide to switching pensions called OP18 (type "op18 pension" in google and it comes up as the 4th entry on my list. You may want to read that. If you feel comfortable with what it says, you could try it yourself. If you think it is going over your head then you could use an IFA.

EdInvestor

Tesmondo wrote:

Are the charges very high, high enough to bite the bullet and opt either to a stakeholder or sipp.

IMHO yes.

But first, you need to figure out what you want to invest the money in, especially if you're thinking of moving to a Sipp.

There are two sides to every investment like this: the tax wrapper (pension,ISA,investment bond, Sipp, whatever, and its charges) and the investments within the wrapper - their performances and charges.

Personally I prefer low cost online ISAs containing shares ( the tax wrapper is much less restrictive), followed by low cost online Sipps containing shares. This appears to me to be the best way to obtain the virtuous combination of low charges and high performance. Unfortunately advisors do not normally play a role in this.

Exactly which shares would depend on your attitude to risk. Investing in shares involves a bit of upfront work, but need not be time-intensive over the long term.

Tesmondo

Would it be possible for you to point me in some kind of direction were I could make a decision on this. Obviously to make a transfer it would have to be into a sipp or stakeholder, but I also like the idea of a low cost online sipp where I can track my own investments and make my own mistakes. I have been following your advice to others and this is why I am now questioning my own pension.
Cheers.

EdInvestor

Hi Tesmondo

You might like to ask on the SIPP board at the Motley Fool

https://www.fool.co.uk.

There are a few refugees from Allied Crowbar who bit the transfer penalty bullet and successfully fled to Sipps over there, who I'm sure will be happy to tell you of their experiences.

dunstonh

IMHO yes.

Thanks Ed. Please can you tell us what charges the Zurich contract has that Tesmondo is on? I dont see any reference to them in this thread and seeing as they had multiple versions, including one with an AMC lower than 1%pa., I would be interested to see where you are getting your information from.

Obviously to make a transfer it would have to be into a sipp or stakeholder

Why are you eliminating personal pensions or hybrid sipps? The stakeholder and SIPPs are at opposite extremes when it comes to investment options. Any reason why you are eliminating the options inbetween which may be more suitable and may be cheaper.

There are a few refugees from Allied Crowbar who bit the transfer penalty bullet and successfully fled to Sipps over there, who I'm sure will be happy to tell you of their experiences.

They probably left AD after the crash thinking AD were bad performers, paid the penalty to move to a SIPP and have benefited from the recovery of the stockmarket but think it was all down to them moving to a SIPP. I wonder how many will make up the charge and how many would have been better switching to different funds instead?

Pal

dunstonh wrote:

They probably left AD after the crash thinking AD were bad performers, paid the penalty to move to a SIPP and have benefited from the recovery of the stockmarket but think it was all down to them moving to a SIPP. I wonder how many will make up the charge and how many would have been better switching to different funds instead?

The answer is "Some of them", others will end up in a worse position than they would have been in using funds. Of more interest is the fact that only those who have profited by the move will go onto Motley Fool to tell the world how clever they are at SIPP investment.

As a result, the MF forums will continue to provide the deluded view to the outside world that everyone who posts there is an investment expert, rather than just a group of statistically inevitable lucky punters.

mikeuk1066

Hi all,

Im sorry if I have posted it in the wrong place.

I just want a bit of advice. Ive got about 40k tied up in a personal pension and am hoping to release it by buying shares in a Limited company. Once invested we would like to use the funds to develop a product.

Does anybody know whether this is allowed, and how do you go about it. Ive searched the net for anything similar but cant find it.

Many thanks

Mike