Mis-Sold Pension - ABBEY LIFE

edinburgher

The fact is that if you would have invested in a pension over this period with any average provider you would expect to have a pension pot of about £75,000

That's an interesting figure you've pulled from under your sombrero (or out your a***)

bendix

Good grief. This thread is getting embarassing now. I can't read sombrero's blind reasoning without blushing a bit for him.

sombrero

I started my pension in 1993 and have made slightly higher contributions. I am in managed or the equivalent 100%. I know what my pension is worth and therefore the comment that the Abbey Life pension has performed average or above average is false.

edinburgher

Good grief. This thread is getting embarassing now. I can't read sombrero's blind reasoning without blushing a bit for him.

A day or two ago I was actually feeling quite bad for the OP, but the thread has descended into a bit of a farce now. I think I'll stop trying to reason/making cheeky comments as the best thing we can do is let it fall off the board

noh

sombrero wrote: »

I started my pension in 1993 and have made slightly higher contributions. I am in managed or the equivalent 100%. I know what my pension is worth and therefore the comment that the Abbey Life pension has performed average or above average is false.

If you had bothered to look up the performance stats of the two Abbey life funds in question (I gave you a link in an earlier post)
You would be able to see for yourself that they have performed broadly in line with their sector average.
Which is exactly what dunstonh said.

Here is a link to the performance graph for the Abbey Managed fund compared with the sector average.
http://www.trustnet.com/Tools/Charting.aspx?typeCode=FABMANP,XP:BAL,

You can add your own fund to the graph for comparison.
If you are unable to do that tell me what your fund is and I will add it and provide the link.

jamesd

twentyfour11, from the descriptions I'll calculate with these assumptions:

11 years at 140 per month, 9 years at £175 per month. This comes to £37,380 total invested, not greatly different from your £36,845 figure.

With a final value of £47,500 those contributions give an average annual return of 2.45% over the whole 20 year period.

That's pessimistic because at the moment the fund value is depressed by the reduced value of stock markets, with the FTSE All Share Index at about 77% of its 2007 value. If I allow for that temporary effect by increasing the fund value by 30% to £61,750 your average return over the 20 years would be almost exactly 5%.

The average return of the ABI Balanced Managed sector from dunstonh's figures was 4.97% and the Abbey Equity was 4.25%. These aren't strictly comparable to your results because your initial eleven years of lower contributions were during a fairly high growth period, then they increased for a lower growth time. That can be expected to reduce your growth compared to the average, since most of the money you put in will have missed the high growth time.

The greatest damage done to the value was not increasing contributions with at least RPI inflation. A £140 monthly contribution twenty years ago would need to be £503 a month today to have kept up with RPI inflation (1979 RP index 60.7, 2009 218), £629 after tax relief. From the look of that, you started off with an excellent contribution level but let inflation reduce its value greatly over time, so it's currently at just 28% of the real (inflation-adjusted) contribution value that you started with.

If you're after advice on what to do about this, I'll assume that you're not planning to retire until age 65 and that you continue to be willing to accept equity investment risk. Your transfer value involves a reduction of 8.5% in your fund value. If you want to remove Abbey Life from your life I suggest that you take that loss and put the money into a mixture of UK and global equity funds and hope to gain from a global recovery over the next few years. Once you get within five years of your planned retirement date, start to switch 15% of your money into a corporate bond fund each year, taking that evenly from your other investments. This will reduce the up and down movements as you get close to retiring. And do something about getting the contribution level back on track. You started out very well, just let it slip over time.

What reason did the helpful person at Abbey Life give for complaining on the basis of mis-sale? Knowing that would give some chance to say whether the ombudsman might agree. So far your descriptions are of a reasonably suitable type of product being sold, correct guidance that you should have been increasing contributions (by at least inflation, so they would keep the same real value as initially) and funds that didn't do horribly badly, but also didn't do wonderfully well.

twentyfour11

Sombrero - Thanks for fighting my corner. Its nice that someone understands how I feel!

Dunstonh - Yes you are 100% correct and I have let this slip over the years. I was very angry when I checked my figures and I am sorry I took this out on you. I have taken the time to read other forums on this site and its obvious that you have offered good advice to many people. I am still quite angry about the guy who sold me the pension but I guess I cant do anything now. I have spent some time researching this and speaking to some advisors and its also clear to me that there are many people out there with similar situations with Abbey Life pension. I am lucky in that I am self employed and I work from home in a service business and that I have no intention of retireing from work at 65 or perhaps even 70 as I enjoy my work although I will scale down at 65. I own my own property and have no debt and have some commerical property inevstments with no mortgages which are my pensions. I am so pleased that I invested my money myself in property rather that place more in pensions.


Jamesd - Thanks for the last post. You have explained yourself very well. However, I have friends who I can compare with and they have all done substantially better than my pension pot when I compare with the time frame and the amount invested.

I would like to quote you ...You say......"I suggest that you take that loss" ......I agree with your comments but I am not taking your advice as it my conclusion.

The pot is worth £42,902 transfer value with the actual fund at £46,712. Yesterday although stock market went up a little my fund went down over £600 in value!!

So I have decided to get out and take my loss

Possible options

1.Take 25% and an annuity which I guess would be around £1,800 pa with single life for 5 years.
2 Take 25% and transfer to a SIPP (possible draw down)

Any other ideas please?

Linton

twentyfour11 wrote: »

The pot is worth £42,902 transfer value with the actual fund at £46,712. Yesterday although stock market went up a little my fund went down over £600 in value!!

So I have decided to get out and take my loss

Possible options

1.Take 25% and an annuity which I guess would be around £1,800 pa with single life for 5 years.
2 Take 25% and transfer to a SIPP (possible draw down)

Any other ideas please?

Stock market changes take a day or two to be reflected in the published pension prices. The drop in your fund would be due to the stock market drop the day (or two) before.

If you transfer to a SIPP what investments are you going to chose that will do better then your current pension fund? I will pre-empt your likely comment that you couldnt do worse by saying "oh yes you can - very much worse" especially as you do not seem to be an experienced investor.

jamesd

It's really tough to compare well with friends because it depends so greatly on ho much was paid in and when, as well as on the fund choices. There are managed funds or funds investing in other market that have done better and worse than yours. I'm not disagreeing with your friends doing better, just adding a note of caution - results are really sensitive to just what was done and you didn't do that badly in result today compared to some.

If you're not planning to take any income from the pension now, just move it somewhere else and don't take the 25%. Once you take anything from it you reduce the payment that family members could get if you were to die before an annuity purchase (if you even plan to buy an annuity, I'm not keen on them).

There's a possible exception to that if you think that your taxable income may exceed £22,000 when retired, where there can be benefit at the moment in moving the 25% out of the pension and into a stocks and shares ISA. The money in the ISA won't count for age allowance reduction, while income from a pension does.

SIPPs are more for those who want flexible investing, particularly shares or owning commercial property within the pension. Their charges can be higher than personal pensions but they offer more investment options.

What do you think you'll want to invest the money in? Any preference between managed funds, tracker funds, ETFs, direct share holdings and other less commonly used investment types?

Funds are almost always valued at noon, so if the market went down in the morning and up by the end of the day you can see a decrease even though the market was up at the end of the day. Various non-UK funds might not use noon. To prevent an opportunity for a particular type of fraud you also have to give instructions buy or sell before you know what the price will be, then you'll buy or sell at the appropriate price for the following noon. ETFs and investment trusts don't work like this, they are traded live on the stock markets in real time.

If you are comfortable with the risks you're young enough that income drawdown is likely to beat buying an annuity, unless you smoke, are overweight or have anything else wrong that might reduce your lie expectancy. Income drawdown has the advantage that a spouse can inherit 100% of the pension pot into their own pension so long as they are alive. None of the time limits or need to pay more for dual life annuity involved.

I'm using a mixture of quite low cost tracker funds at work and higher risk managed funds at Hargreaves Lansdown's SIPP. I haven't yet used the extra SIPP flexibility at HL, though I've considered it a few times. And also a lot going into S&S ISA investments.