Mis-Sold Pension - ABBEY LIFE

dunstonh

I just googled Abbey Life and I see that they were fined £1,000,000 for the bad selling mortgage products.

Mortgages are not pensions.

Dunstonh, in my opinion the OP has had a very, very poor deal.

He didnt. He had the going rates for a 1990 product. Not good by 2010 standards but look at most retail products available today and compare them to 1990 and the modern versions look better.

The OP stated that he invested with his pension tax advantage £36,845. The OP stated that the pension is worth £43,500 (£47,500 cash value).

So I can see that in my opinion your advice that the funds has done ok is wrong advice.

The funds have performed in line or above sector average. That is a fact. Also, his net cost was about £27-28k (we cant tell as we dont know how much was paid in when basic rate was above 20%).

The money would not have been paid in as a single premium but fed in over time. So, the bulk of the money hasnt been invested for 20 years.

I have a question to you. You stated:-

"The fact is though that both funds have performed in line with their sector averages or just above. So, they are not bad performers".

Are you prepared to stick to your comments or are you prepared to ammend in light of amended figures stated by the OP?

Its fact that the investment funds have outperformed or performed in line with their benchmark means they cannot be classed as performing badly.

The reason they give the impression of being poor is a lack of understanding by the OP of the effects of regular contributions which do not get topped up, the fact that the only one months contribution gets invested for the full term to date and that investments zig zag in value and the impact of a market crash in the short term.

Example:
£100pm over 12 months. = £1200. Then a 40% market crash occurs. Value drops to £720. Hardly a drop despite a major crash. However, contributions after that buy investments cheaper and when recovery occurs, those cheaper investments make the most money.

Many decades on. Value is now £60,000. However, along comes a stockmarket crash of 40%. Value drops to £36000. The impact of a 40% crash is greater as the value is higher. However, the same principle applies. Investments bought monthly after the crash are cheaper. When recovery comes the lump sum will build up to recover and the contributions made afterwards will see growth. Given that its decades later, you would expect the monthly contributions to be higher (although they are not in this case).

The lack of rebalancing on the pension and poor diversification have certainly hit it. They dont matter much in the early years but once the value builds up they are vital. The OP at no point rebalanced or moved to protect any of the growth obtained. He stayed with around 50% of it invested in medium/high risk investments that are volatile.

If you invest in medium/high risk funds then you should expect medium/high risk levels of volatility in the short term. A short term downturn does not make an investment bad and it can actually be a good thing for the regular contributions. Its only bad if you want the money out now or in the very near future. However, that doesnt make the investment bad. it makes your planning bad as you should have been reducing the risk on the investments years earlier.

sombrero

Bendix
Thanks for the response. As I see it the OP has a complaint that he was mis sold a pension product. He got dates mixed up but after checking he corrected the figures. We all make mistakes.

I think mis selling and poor performance are related but perhaps you have a different opinion and you are entitled to that opinion. the OP did say that the pension had performed badly but the expert IFA says that the pension has done slightly better than the average.

As I see it there are are two issues-

Was there mis selling? Difficult to prove but Abbey Life were fined £1,000,000 for the mis selling of mortgages and so the track record of Abbey Life is not good. Is possible that the OP is right but for wrong reasons.

The second issue is the performance of the fund. The IFA expert states that the pension has performed better than the average.

I would like for the OP to re check the figures with Abbey Life and for the IFA expert to give new comments or stick with his original comment that the pension has performed better than average.

dunstonh

think mis selling and poor performance are related but perhaps you have a different opinion

Go back to 1990. The future hasnt happened. So, how can future performance which has yet to occur make the sale a mis-sale?

As I see it the OP has a complaint that he was mis sold a pension product.

How?

You keep saying it but nothing on this thread suggests any hint of mis-sale. He was self employed (so no occ scheme available). He wanted to save to retirement (so pension is fine). So, was it a mis-sale?

Was there mis selling? Difficult to prove but Abbey Life were fined £1,000,000 for the mis selling of mortgages and so the track record of Abbey Life is not good. Is possible that the OP is right but for wrong reasons.

He bought a pension. Not a mortgage.

I would like for the OP to re check the figures with Abbey Life and for the IFA expert to give new comments or stick with his original comment that the pension has performed better than average.

FACTS:

since 24th August 1990 to 24th August 2010

ABI Balanced managed sector average: 263.65%
Abbey Managed: 249.70%
Abbey Equity: 229.66%

So, you can see that they are much in line with the sector average. If you can see the graph showing all three there are points when the fund cross each other with each taking it in turns when its best but more or less the same. The deviation between them is minimal. The performance prior to 2000 was slightly better than post 2000 but thats not unusual. Closed companies do have a tendency not to put the same resources into it that open ones may do. In April both the funds were higher than the sector average to give you an idea of how recent the lines crossed each other.

bendix

dunstonh, please don't let carefully researched facts get in the way of perfectly irrational prejudices.

it gets a bit confusing when you do that.

sombrero

The OP stated that his actual payments are £36,845 over this time period. He is also saying that his pension value today is £47,500.

Leaving aside your % figures are the above figure in line with your expection of how an average pension would have performed over this time period with these payment.

On a side note the OP stated that he had 50% in managed and 50% in UK shares. It does not seem that he has really gambled with his planning.

edinburgher

What has happened to this country?

God only knows! I'm still miffed about the Canadian government changing their entry criteria so that I couldn't leave

dunstonh

The OP stated that his actual payments are £36,845 over this time period. He is also saying that his pension value today is £47,500.

Exactly. "over the time period" is not the same as investing it all on day one. Most of the money hasnt been invested for 10 years, let alone 20.

On a side note the OP stated that he had 50% in managed and 50% in UK shares. It does not seem that he has really gambled with his planning.

Its not a gamble but balanced is medium risk and UK equity is medium/high. Its overly weighted to the UK stockmarket with very little downside protection and no rebalancing on over half of it.

bendix

edinburgher wrote: »

God only knows! I'm still miffed about the Canadian government changing their entry criteria so that I couldn't leave

Go east young man. Go east.

The future is Asia.

I think some of the people here who have been so molly-coddled by British society as to have handed over any sense of personal responsibility or interest in looknig after themselves, should be sentenced to a dose of living in the third world for a while, to get some perspective.

bendix

dunstonh wrote: »

Exactly. "over the time period" is not the same as investing it all on day one. Most of the money hasnt been invested for 10 years, let alone 20.



.

It beggars belief that people can't see that. The papers are full of stories saying we are getting more and more GCSEs . . how come we are so stupid at basic maths, if that's the case.

How can the OP not understand that only his first monthly contribution has been invested for twenty years? In twenty years, he has made 240 monthly contributions. Only one has been invested all that time. A month passes, and another monthly contribution is made, which has been invested (for argument's sake) for nineteen years, eleven months and so on.

The OP seems to look at one figure (£36000) and then look at the result (47,000) and think that the return over twenty years has only been around 0.5% per annum.

God help us.

vbm

Honeslty the level of ignorance is frightening. What is worse is that Dunstonh takes his time to respond carefully, and because people still cant grasp the concepts they assume they have been mis-sold.

When stocks were rising up to 2007, everything was rosy. Then boom a massive financial crash later, where the footsie drops a couple thousand points when the majority of UK pension savings are invested in these assets, and all of a sudden it is the fault of the provider, the IFA, the fund managers...not the fault off the individual who didnt understand the need to rebalance or lock in gains to derisk.

To be fair, you could argue that the Abbey, IFA and other parties should have provided help and guidance on this subject and today they are more likey to. But the 'I was mis-sold, because a product I bought worked as it should, but not how I expected' line is getting old.