Confused & Disappointed - Pension Transfer

JohnG

Hi,

I'm in the process of trying to transfer my stagnating Equitable Life WP pension fund to something more beneficial. Shouldn't be difficult I know but....

My wife and I met with a local IFA recently to discuss this and was extremely pleasant and helpful. We have now just received details of recommended product (Stakeholder Pension) and all seemed ideal and promising, that's until I got to the bottom line and the commission they apparently recieve!

My Equitable fund amounts to a fairly meagre £29,311 after their 8% transfer fee so to discover the IFA guy stands to recieve a further 6% of it straight away plus a further £400+ over another two years is frankly, very disturbing.

Is this normal? I guess so as the IFA seems to do everything by the book, but from my point of view, a further £2100+ from a relatively small pot of money is far more than I had expected for what amounts to about half a days work. Besides it would have taken me about 3 years to acrue it in the first place and personally I would be lucky to earn that in a good month (Self Employed).

I'm feeling very disappointed and let down (To put it mildly) having thought I was doing the right thing by getting advice etc. Instead it just reinforces my feeling that everyone out there just wants a piece of my very small cake every which way I turn.

I'm now thinking of going direct to a different Pension supplier., at least I will have something to compare potential performances with if nothing else.

Has anyone any thoughts or suggestions on this?

Cheers
John

EdInvestor

Hi john

Do you have any thoughts about what you want to invest the money in and do you plan to invest any more money in this fund in future?

There are two bits to a pension: the tax wrapper, and the funds/shares or whatever that the money is actually invested in.Both bits may have charges. Many of them can be avoided but it's useful to have a rough idea of where you will invest the money first.

As for what is normal, I'm afraid the opening charges are not the end of it all, more's the pity

Try looking at the FSA's website, go to the pension tables:

https://www.fsa.gov.uk/tables

You can see why the Pensions Commission was so insistent that something has to be done about the loss of 25-30% of the fund in charges over the years.

JohnG

Hi Ed,

It's really good to hear from you.

Have I any thoughts in what I want to invest in? Not really, I just want to find something that hopefully offers best return potential without too much risk and costs? Doesn't everyone I hear you say....

Anyway, although I know at the moment is that a Stakeholder pension is apparently my best option but where I go from there I don't know?

Sorry I know I am being a bit hopeless on this but just an awful subject to have to deal with (again).

Thanks for any help you can provide

Cheers
John

margaretclare

JohnG wrote:

Anyway, although I know at the moment is that a Stakeholder pension is apparently my best option but where I go from there I don't know?

Have a look at this: http://www.stakeholderhelpline.org.uk/

All the big companies like Norwich Union, Friends Provident etc have a stakeholder pension scheme. The beauty of these schemes is that they're a lot easier to understand than anything that went before them. The taxman gives you money e.g. if you decide to put in £78 a month the taxman adds £22 making £100 which is then invested (but you can put in any amount, I think the minimum is £20 a month). There are various funds within each provider's schemes, you just choose the one you fancy most. You can move them at any time, stop paying, pay more, pay less - you can't draw out until you reach 50 or 55 and then you can take 25% as a tax-free lump sum, this is in addition to any other pension provision you have e.g. state. You can carry on paying in for a lot longer than with e.g. the state scheme. In fact I started one when I was 67, am 70 now, am now transferring the 'pot' to a SIPP (self-invested personal pension) and I've learned as I've gone along!

Best wishes

Margaret Clare

EdInvestor

JohnG wrote:

Anyway, although I know at the moment is that a Stakeholder pension is apparently my best option but where I go from there I don't know?

It might be. Are you going to contribute more into this pension or is it a lump sum to be invested?

Could you have a look at this
asset allocation calculator and tell us what it says? It will help you decide how much of the money should be put in each different type of investment.

JohnG

Thank you both, Margaret and Ed!

The aim was to restart a Pension plan using the Equitable pot as an initial lump sum and then paying in a monthly premium probably the £78.00 per month at least to start with.

Have tried the Asset Allocator thing. Wasn't sure how certain bits fit with my situation and the dollar thing is a bit approx so may not be right but anyway here are the results that I got:

Age 44
Current assets $50,000
Savings per year $2,000
Income required 0.1%
Marginal tax rate 25%
Risk tolerance Balanced (5 scale of 0 to 10)
Economic outlook Moderate (5 scale of 0 to 10)


Large cap stock 26% $13,000
Mid cap stock 14% $7,000
Small cap stock 10% $5,000
Foreign stock 12% $6,000
Bonds 14% $7,000
Municipal bonds 0% $0
Cash 24% $12,000


Will also look at the Stakeholder site a bit later, hopefully that will clarify things a bit too.

I will feel a bit bad not taking up the IFA recommendation as he did go to a certain amount of trouble but on the other hand....

Thanks again, meanwhile will look forward to any other feedback especially on this asset thing?

Cheers
John

EdInvestor

JohnG wrote:

Large cap stock 26% $13,000
Mid cap stock 14% $7,000
Small cap stock 10% $5,000
Foreign stock 12% $6,000
Bonds 14% $7,000
Municipal bonds 0% $0
Cash 24% $12,000

OK, this translates into an investment mix of

Mainstream UK shares: 40%
More risky shares ( overseas/ UK small caps) 24%
Low risk non-share investments ( commercial property, bonds) 38%

Does that sound about right?

It's a low-medium risk profile.

If so we now need to look for a provider which offers good funds in the categories above at low (stakeholder) charges. I think it's fair to say that most insurers do well with their commercial property and usually also their bond funds.It's the equities where they tend to be a bit pedestrian.

So many of them are these days offering outside funds as well as their own (at an extra charge of course!).It's not always necessary to pay more and go for an outside one, there are some good inside funds, it's just a matter of finding them.

Anyway for a start, john, you may like to have a trawl through this list of smaller company pension funds and make a note of a few that look like they might be potential choices.

whiteflag_3

JohnG wrote:

Hi,

I'm in the process of trying to transfer my stagnating Equitable Life WP pension fund to something more beneficial. Shouldn't be difficult I know but....

My wife and I met with a local IFA recently to discuss this and was extremely pleasant and helpful. We have now just received details of recommended product (Stakeholder Pension) and all seemed ideal and promising, that's until I got to the bottom line and the commission they apparently recieve!

My Equitable fund amounts to a fairly meagre £29,311 after their 8% transfer fee so to discover the IFA guy stands to recieve a further 6% of it straight away plus a further £400+ over another two years is frankly, very disturbing.

Is this normal? I guess so as the IFA seems to do everything by the book, but from my point of view, a further £2100+ from a relatively small pot of money is far more than I had expected for what amounts to about half a days work. Besides it would have taken me about 3 years to acrue it in the first place and personally I would be lucky to earn that in a good month (Self Employed).

I'm feeling very disappointed and let down (To put it mildly) having thought I was doing the right thing by getting advice etc. Instead it just reinforces my feeling that everyone out there just wants a piece of my very small cake every which way I turn.

I'm now thinking of going direct to a different Pension supplier., at least I will have something to compare potential performances with if nothing else.

Has anyone any thoughts or suggestions on this?

Cheers
John

John - Why did your IFA recommend a stakeholder? It doesnt make any sense to me - btw i am an IFA

If you can post exactly what product has been recommended i will give you my professional opinion - no charge

[Deleted User]

___ deleted ___

EdInvestor

you easily can do it yourself

This is not a good idea with a traditional provider, who will charge you the same amount you pay to the IFA.

With a traditional provider (insurance co), you must set up a pension via a discount IFA or broker in order to get the charges rebated.

If you are setting up a SIPP instead, using one of the low cost online ones such as HL or Sippdeal, it is OK to go direct because they are "execution-only" providers who don't pay commission..

Do you fancy a SIPP John? HL would probably be the cheapest provider for what you want to do. It does give you access to ALL the best funds if you go that way.:)

https://www.hargreaveslansdown.co.uk

margaretclare

EdInvestor wrote:

If you are setting up a SIPP instead, using one of the low cost online ones such as HL or Sippdeal, it is OK to go direct because they are "execution-only" providers who don't pay commission..

Do you fancy a SIPP John? HL would probably be the cheapest provider for what you want to do. It does give you access to ALL the best funds if you go that way.:)

https://www.hargreaveslansdown.co.uk

This is what I'm doing, transferring my Friends Provident stakeholder pot to a SIPP with HL. I decided on this because I don't want another annuity. Hopefully I'll get the 25% tax-free lump sum soon from FP because I need ti to get our roof replaced. I'm also having annual drawdown.

Margaret Clare