Repensioning. Increase your pensions return without any risk discussion area

dunstonh

However, I can see why a FA might be biased as they don't get there big fat commision from property as they do with shares/pensions.

How much do i get paid for posting on these forums? zero. Please do not acuse me of bias. I have my opinions and I never shy away from saying them but they are not formed on the basis of any bias. Also, as I am a NMA IFA your accusations are not appropriate for me.

Compared to ~15% at best return on investment (currently much much lower), forced into buying an annuity at there current rates, not able to touch the money till 50+ yrs old, partially taxed when receive income (tax DEFFERED, not tax free), only a partial amount of the investment going to children, if any etc etc

A pension is just a tax wrapper and not a very desirable one at that but you are comparing car and petrol as a pension doesnt make or lose money. Its where you invest that does. Property is an investment and not a tax wrapper.

As for equities, 10-15% p.a. if done before stockmarket crash or doubled in last 3 years if done after is a fair rate of return on equity portfolios. The point on annuities is not applicable as that applies to a certain tax wrapper which has nothing to do with the method of investing.

Whilst we could debate past performance over varying periods when at times equities have been better and property other, you need to look at future potential and that is very limited for UK residential property. Rental yields are low and capital growth is likely to be limited.

There seems to be a mindset in the UK at the moment that property only goes up. Its ripe for 30% drop. Whether or not it will come or how it will come, we dont know but the indications are the future returns are not going to be like the last 8 years.

And another thing, as you commented on the taxation on the pension wrapper, you do need to consider that rental income is liable to income tax and the property liable to capital gains tax on disposal. Coupled with it being hit for 40% IHT when passing on to children on death, it isnt all a bed of roses.

Thanks for your advice - I think my last question made you miss-understand that I had a SIPP. It's simply a company pension plan.

You indicated that it was a standard life group personal pension (GPPP). In which case, you are not the owner of the scheme at this stage. The employer is. If you leave that employer, SL will "K" code the policy number and allocate it to you and you can then do what you like with it.

Paul_Herring

stphnstevey wrote:

However, I can see why a FA might be biased as they don't get there[sic] big fat commision from property as they do with shares/pensions.

Oh dear. Not another one.

speedtwin

This might be a silly question but is there any savings to be made if you have a suspended pension. ive got three but i dont pay into them any more.

Reaper

It's not entirely related but Martin - please can we have the article on SIPPs which you have been saying is "coming in the next few weeks" or "coming soon" ever since SIPPs were launched.

dunstonh

This might be a silly question but is there any savings to be made if you have a suspended pension. ive got three but i dont pay into them any more.

Possibly. Older pensions tend to either be very cheap or very expensive. Often there is no middle ground. Also, if the pensions are held with closed insurance companies, you will not be able to "repension". You would need to transfer.

The other thing to be wary of is that there may be penalties on doing this. You shouldnt "repension" or transfer pensions without verifying the costs, benefits you may lose (such as GMP/GAR/GMFV) and make sure the current contract is better than the old one you have.

It's not entirely related but Martin - please can we have the article on SIPPs which you have been saying is "coming in the next few weeks" or "coming soon" ever since SIPPs were launched.

It would be nice to see. Especially if you include hybrid SIPPs which can be cheaper than HL's SIPP which usually gets remarked on.

MSE_Martin

Sipps will be coming its on the schedule - but i can't promise when - i hope within the next two months!

Superboy123

So I read the article, and want to know - is there any reason why I woul dnot print off the Cavendish letter and go ahead with the repensioning process? Is there any possible downside? Why would anyone not do this, if it is such a winner?

EdInvestor

Superboy123 wrote:

So I read the article, and want to know - is there any reason why I woul dnot print off the Cavendish letter and go ahead with the repensioning process? Is there any possible downside? Why would anyone not do this, if it is such a winner?

Try reading the thread again from the top.

Superboy123

Not the most helpful thread. It's risk free, but might have some risk.

dunstonh

It's risk free, but might have some risk.

The article says it is risk free. The posts on this thread point out that it isnt.

If you have primary or enhanced protection on your pension then you could lose tens of thousands of pounds by repensioning.

If you have guaranteed annuity rates, guaranteed minimum fund values or a guaranteed minimum pension you would lose all those by repensioning.

If you have a pension that pays bonuses based on the number of years the policy is held, you will reset the year counter to zero by repensioning.

If you have a Norwich Union with profits pension you will be removing your eligibility to a special bonus that is expected to be paid in 2008 when it is expected they will share out the orphan funds.

If you have a cheaper pension already, you could end up paying more in charges by repensioning. (quite common with older plans which had higher upfront charges but lower annual).

I think the thread is helpful in pointing out all the risks which exist with this apparent "risk free" process.