Allied Dunbar pension

impeystick

My previous employer set me up in their pension scheme with Allied Dunbar (AD) in 1996. I left the company about 2 years later but kept the payments up to this day.
My problem is wheather I should transfer the pension to a stakeholder and take advantage of the low capped fees as I believe my pension is one of the 'front end loaded' type which everyone seems to have a low opinion of.
I have spoken to an IFA to try and make some sense of my existing policy but I've just ended up being confused. I'm currently paying in £200 per month and I have a transfer value of a little under £13,000 and the amount I paid into it is £17,000 (as of May 2005). He explained to me that AD they can take upto 20% off the initial investment in the early days which impacts what can be transferred out compared to leaving the fund with them, (which is probably why I don't have as much money as I put in) after which time the upfront charges or the effects of them diminish.
what I would like to do is to reduce the payment to maybe just £75 per month and start overpaying on my mortgage as I feel the money would work harder for me there. This pension is really bugging me and I badly want to do something about it.

This is my first post and have always been impressed by peoples honesty and knowledge so many thanks in advance.

dunstonh

My problem is wheather I should transfer the pension to a stakeholder and take advantage of the low capped fees as I believe my pension is one of the 'front end loaded' type which everyone seems to have a low opinion of.

The AD pension is expensive at the front end but often has lower annual charges which are lower than stakeholder.

what I would like to do is to reduce the payment to maybe just £75 per month and start overpaying on my mortgage as I feel the money would work harder for me there.

It certainly wouldnt have been working harder for you. Even sector averages on an asset allocated portfolio have returned more than the interest you pay on the mortgage.

You need to think of this as an investment and not a pension. Pension transfers are not the easiest transaction to understand as you can have multiple layers of charges which need to be considered. You sought advice and that person knows more about the pension than we do here.

Amys

As a former financial adviser (now economist) it is highly unlikey it will be worth taking the transfer vlaue. The set up fees have been paid, so not it is only the running costs, you are likey to be heavily penalised on the transfer vlaue and when you move it there will still be set up costs, even if they are capped.

Just because there are capped fees does not mean it is a better pension, lower fees may mean less manangment, which may result in lower or higher growth. The difficulty is is that past grpewth is also not an indicater of potential fufutre growth.

The starting point is to look at the actual current fund value and then look at the transfer value. There can be a lot of difference and think of that as the immidate cost of transfering the penison, it may be too much to bear.

Also, don't forget nearly all financvial advisers get paid by comisson, regardless of if they are independant or tied, and that they only have to give you good advice to comply with regualtions, this can be one of those issues that can often be argued either way (It used to be best advice but it changed). If you want expert adivvce find a fee based IFA who you pay a fee to and gets paid no matter wat you decide. If you do take out any pilicies this can also give you a better retrun as fee gbased IFAs (rare but they do exist) will usually rebate the comisison into the policy. There are good ones around, but it is also good to be cautous,.

As already stated the running costs at AD are lower than many others and you have already paid the heavy start up fees. However, this is general observations and not advice on your personal situaion and should not be taken as such.

EdInvestor

I've run across a few people with these nasty Allied Crowbar pensions. :mad:

Several have bitten the bullet and transferred the money out into a low cost online Sipp with a provider such as https://www.sippdeal.co.uk which charges no annual fee.

They have then invested the money in a High Yield Portfolio of shares.After the first year when the shares have been bought, the Sipp will incur virtually no charges.

This enables the victim to recoup the losses fairly quickly.The victims report that the sense of relief in escaping from the clutches of Crowbar is worth the change in itself.

Does this sound familiar?

shiredeon

If i'm stating the obvious i apologise, but check that you are not making regular payments, if you make single contributions but on a regular basis , ie pay the same amount but in a different format the charges are lower, i was doing that on my allied crowber pension until i took them to task over it, i managed to get them to back date the payments on the grounds that i'd been mis sold.
good luck.

impeystick

Thanks for all your replies but my head is starting to spin again. If I decide to leave the pension alone am I doing something blatantly wrong? Is it unusual for the transfer value to be a lot less than what paid into it? I'm assuming the stock market is to blame for the low return as well as the up front charges?

I read your reply shiredeon but I don't understand what your getting at. I have been making regular payments and have increased them over the years. What happened when you got them to 'task over it'. Did the pension stop?

dunstonh

as fee gbased IFAs (rare but they do exist) will usually rebate the comisison into the policy. There are good ones around, but it is also good to be cautous

Every IFA in the country is available on fee basis. You cannot use the term independent if you do not have a published fee basis.

I have transferred about 3 ex Allied Dunbar pensions in the last few years and all had good figures on a TVAS which were better than stakeholder. The only reason we transferred them was to a hybrid SIPP and a sector allocated portfolio with rebalancing (basically, top end quality investing).

If you intend to stick with bog standard stakeholders as an alternative, then you may well find the AD pension is lower charged over term.

shiredeon

i know it sounds crazy, if you make regular contributions they charge you a certain amount for processing it, if you make a single lump sum contribution the charges are considerably lower, now you may think hang on i don't want the hassle of having to save up the money myself and make the payments once a year, not so, you just make the same contributions but call them "regular single payments" and they attract less charges, ask them about it, or your adviser who may or may not want to admit it as i think they get more when you pay by regular contributions, let me know how you get on, by the way mine is an executive pension fund so may be different but ask anyway.

Amys

dunstonh wrote:

Every IFA in the country is available on fee basis. You cannot use the term independent if you do not have a published fee basis.

THanks for the update, I have been out for a while and a few years ago it was not the norm for many IFAs to offer, or make very apparent the fee based advice, it is good to see it is more available now.

EdInvestor

shiredeon wrote:

i know it sounds crazy, if you make regular contributions they charge you a certain amount for processing it, if you make a single lump sum contribution the charges are considerably lower.

AFAIK shiredeon is right about this difference between regular and single premium contributions: for instance Crowbar protected rights pensions, which receive the one annual rebate contribution pa from the Govt - and are thus single premium pensions - are not subject to these draconian upfront charges that apply to the pensions with regular premiums.

If I decide to leave the pension alone am I doing something blatantly wrong?

To suss this out, I suggest that reread the links above, taking your time to grasp the issues raised. There's no rush

Then ask AD for a projected maturity value for this pension at the time you are due to retire, if you continue as now.Also ask for a projected maturity value oif you stop paying in any new contributions.

Then come back and tell us what these figures are.

Is it unusual for the transfer value to be a lot less than what paid into it?

After 10 years, yes.

I'm assuming the stock market is to blame for the low return as well as the up front charges?

The stockmarket won't have helped but it's the charges that are doing the real damage.

dunstonh

THanks for the update, I have been out for a while and a few years ago it was not the norm for many IFAs to offer, or make very apparent the fee based advice, it is good to see it is more available now.

July last year the rules changed on that front. IFAs who chose not to offer fees had to stop using the term IFA or the word independent. They are now known as whole of market advisers but not many IFAs when down that route. You also had the introduction of multi-tied in the last couple of years. That hasnt had the take up as expected but some have moved over to that. It can be around 5-10 providers on a panel. The "sales" models are quite attracted to that as the running costs are lower with much of the cost taken on by the insurance companies. Plus the commission rates are thought to be higher.

Thanks for all your replies but my head is starting to spin again.

Ignore the investment strategies mentioned on this thread. If you are get confused with just the wrapper being talked about then going with the HYP strategy isnt for you. Plus we dont know your risk profile and goals so suggesting how you invest without knowing that is not a good idea.

To keep it simple. Compare the projections. That is what the IFA would have done. From there, the recommendation would be made. What was that recommendation?