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FA/Pension advisors answers to my questions: Comments please?
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buel
Posts: 674 Forumite
Hello.
Yesterday i had a meeting with an IFA/Company Pension advisor. I asked the very helpful people on this forum what sort of questions i should ask him regarding the pension he would offer and they were very helpful.
I am going to post my questions and his answers, please feel free to give any comments on the answers he gave, plus if this pension proposal sounds decent.
Thank you in advance.
Q. What will my pension contributions be invested in?
A. Up to you. Bonds, gilts, Gold etc
Q. What is your trail commission?
A. Trail commission? Yes please (laughs). I don't get any.
Q. How do you make any profit from this then?
A. Scottish Widows pay me for each one i sell/sign up.
Q. What is the AMC?
A. From between 1% and 2%. (When pressed he said "The average is 1.4%. For instance, Black Rock Gold take 2%")
Q. Do my employers contribute?
A. Yes, your minimum contribution is 3% of your gross basic pay, they match that but no more, whatever you put in they will only put in that 3%
Q. Can i contribute more than 3%? If so, how much?
A. You can put in 100% if you want.
Q.What funds are there to choose from?
A. Any you want. Low risk, medium or High. I advise invest in high risk to begin with.
Q. What is the expected rate of return?
A. Who knows. It can vary. 'Expected rate' can mean nothing as funds go up and down.
Q. At what age will this pension mature/finish?
A. 65
Q. What happens if i die before i get to 65?
A. It goes to your next of kin.
Q. Is there a 'Death in service' benefit?
A. No
Q. Will it buy an annuity when it matures/finishes?
A. Not neccessarily, you can choose to continue to invest or take the cash.
Q. What if you go out of business?
A. The pension with Scottish widows and it will continue.
Q. Is this pension a better deal than the N.E.S.T which will come into effect soon?
A. Yes. For a company of this size it wont have to opt you in until 2016.
Q. How often will you review the pension?
A. Once a year.
The only other comment to make, which i found a little odd, is that he mentioned to me how he is able to 'Get your cash before you turn 55'. I said that i have been told that that is impossible, he said something along the lines of 'There are ways and means. It works for some people who really need it. If they waste it or whatever, that's up to them'.
Now, i know zero about pensions but am i correct in thinking that the very fact that my employer will put 3% is a huge incentive?
The only other information i will add, which i doubt is relevant, is that his company was first registered in January this year and the three other companies he was director of have all been dissolved, according to a quick Google search and regarding the new company, my search showed 'This company has not yet filed an annual return stating their SIC code or description of their activities', if that helps.
Please feel free to comment and thank you in advance for your comments.
Yesterday i had a meeting with an IFA/Company Pension advisor. I asked the very helpful people on this forum what sort of questions i should ask him regarding the pension he would offer and they were very helpful.
I am going to post my questions and his answers, please feel free to give any comments on the answers he gave, plus if this pension proposal sounds decent.
Thank you in advance.
Q. What will my pension contributions be invested in?
A. Up to you. Bonds, gilts, Gold etc
Q. What is your trail commission?
A. Trail commission? Yes please (laughs). I don't get any.
Q. How do you make any profit from this then?
A. Scottish Widows pay me for each one i sell/sign up.
Q. What is the AMC?
A. From between 1% and 2%. (When pressed he said "The average is 1.4%. For instance, Black Rock Gold take 2%")
Q. Do my employers contribute?
A. Yes, your minimum contribution is 3% of your gross basic pay, they match that but no more, whatever you put in they will only put in that 3%
Q. Can i contribute more than 3%? If so, how much?
A. You can put in 100% if you want.
Q.What funds are there to choose from?
A. Any you want. Low risk, medium or High. I advise invest in high risk to begin with.
Q. What is the expected rate of return?
A. Who knows. It can vary. 'Expected rate' can mean nothing as funds go up and down.
Q. At what age will this pension mature/finish?
A. 65
Q. What happens if i die before i get to 65?
A. It goes to your next of kin.
Q. Is there a 'Death in service' benefit?
A. No
Q. Will it buy an annuity when it matures/finishes?
A. Not neccessarily, you can choose to continue to invest or take the cash.
Q. What if you go out of business?
A. The pension with Scottish widows and it will continue.
Q. Is this pension a better deal than the N.E.S.T which will come into effect soon?
A. Yes. For a company of this size it wont have to opt you in until 2016.
Q. How often will you review the pension?
A. Once a year.
The only other comment to make, which i found a little odd, is that he mentioned to me how he is able to 'Get your cash before you turn 55'. I said that i have been told that that is impossible, he said something along the lines of 'There are ways and means. It works for some people who really need it. If they waste it or whatever, that's up to them'.
Now, i know zero about pensions but am i correct in thinking that the very fact that my employer will put 3% is a huge incentive?
The only other information i will add, which i doubt is relevant, is that his company was first registered in January this year and the three other companies he was director of have all been dissolved, according to a quick Google search and regarding the new company, my search showed 'This company has not yet filed an annual return stating their SIC code or description of their activities', if that helps.
Please feel free to comment and thank you in advance for your comments.
Not yet a total moneysaving expert...but im trying!!
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Comments
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Hello anyone?Not yet a total moneysaving expert...but im trying!!0
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Q. What will my pension contributions be invested in?
A. Up to you. Bonds, gilts, Gold etc
That indicates you are not being offered an advice service or the adviser is not an IFA. (FAs put the choice with you. IFAs recommend the funds - but only on advice)Q. What is your trail commission?
A. Trail commission? Yes please (laughs). I don't get any.
Q. How do you make any profit from this then?
A. Scottish Widows pay me for each one i sell/sign up.
Most pensions dont pay trail commission. Only if assets are used that pay trail would it or if you have explicitly agreed a fixed charge.Q. What is the AMC?
A. From between 1% and 2%. (When pressed he said "The average is 1.4%. For instance, Black Rock Gold take 2%")
Sounds about right. Remember that with pension funds, the AMC is also the TER.Q.What funds are there to choose from?
A. Any you want. Low risk, medium or High. I advise invest in high risk to begin with.
If he isnt giving advice then he should avoid statements like that. Although he may be giving a generic example if you have a long time to go.The only other comment to make, which i found a little odd, is that he mentioned to me how he is able to 'Get your cash before you turn 55'. I said that i have been told that that is impossible, he said something along the lines of 'There are ways and means. It works for some people who really need it. If they waste it or whatever, that's up to them'.
There are no legal means.Now, i know zero about pensions but am i correct in thinking that the very fact that my employer will put 3% is a huge incentive?
Its a no brainer. Free money. Nothing beats free money.The only other information i will add, which i doubt is relevant, is that his company was first registered in January this year and the three other companies he was director of have all been dissolved, according to a quick Google search and regarding the new company, my search showed 'This company has not yet filed an annual return stating their SIC code or description of their activities', if that helps.
Maybe he is consolidating his business into others. There is a lot of that going on at the moment in the run up to the retail distribution review. It doesnt really matter though. There is so little that can go wrong with joining a works scheme that you dont need to worry about it.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Q. Do my employers contribute?
A. Yes, your minimum contribution is 3% of your gross basic pay, they match that but no more, whatever you put in they will only put in that 3%
Many individuals will tell you that the tax relief on contributions + the contribution made by your employer are benefits. But in truth they are obligatory/ necessary because a basic rate tax payer will need every penny of the tax relief + an employer contribution of at least 50% of the employees' to make up for the negatives of extra costs - the lack of financial flexibility, both in our working and retirement years - the loss of financial independence, the lower survivor pension and the tax due on the annuity income. In effect a pensioner will need a pot that is at least 30% greater than a retiree who provides for retirement sans pension before they gain a measurable, albeit then only a possible financial, benefit. In a nutshell, tax relief at 20% and minimal employer contributions are not 'free money' they are a minimum requirement.0 -
the loss of financial independence
The GAD limits are a sod, so yes, some non-pension funds are handy.the lower survivor pension
100%, if you choose it, and it doesn't cost much more.the tax due on the annuity income.
25% tax free, and for many the annual income won't push them out of their age related allowance.In effect a pensioner will need a pot that is at least 30% greater than a retiree who provides for retirement sans pension
I'd like to see your working. I'm not saying the pension doesn't have to be larger because of the tax situation, but I'm not convinced by that 30% figure for the average pension pot.
I'm predicting that after PCLS we'll have 50% of our non-property retirement funds in pensions and the rest outside, which feels about right to me.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Hi all and thank you so much for the answers....even if i didn't understand them all!
Ok, im having a meeting again today with the IFA (I meant to put that he was an IFA and not an FA in the title).
Do you think there are any more questions to ask before i sign up?Not yet a total moneysaving expert...but im trying!!0 -
Ok well i've met the IFA and he's given me a 'key facts' booklet detailing the charges, the projected outcome of the pension etc etc.
If i delete all personal information am i allowed to post a few of the pages tonight for any further comments?Not yet a total moneysaving expert...but im trying!!0 -
Do you think there are any more questions to ask before i sign up?
I don't think you should have any hesitation in signing up but you could ask if he is giving advice on what funds should be chosen or if he is simply telling you the options available. If he is giving advice what would that advice cost?0 -
Ha ha, thank you jem!
Ok, i shall post them tonight anyway....just in case (cautious is the word for me, im afraid)
Just some things that have shocked me/opened my eyes-
The fact that the IFA gets £427 for each person he signs up (not that it affects me, i guess)
Tax relief- Due to my complete lack of knowledge i had no idea that for my minimum contribution of £50 i get an extra £12.57 tax relief. I had no idea what tax relief is!
That the 'Effect of deductions' on the first years contributions of £1357 is just £7 but in year 29 the 'Effect of deductions' is a whopping £20,900 on the contributions of £40,493!! Wow that is a huge sum!!
( Not yet a total moneysaving expert...but im trying!!0 -
Ha ha, thank you jem!
Ok, i shall post them tonight anyway....just in case (cautious is the word for me, im afraid)
Just some things that have shocked me/opened my eyes-
The fact that the IFA gets £427 for each person he signs up (not that it affects me, i guess)
Tax relief- Due to my complete lack of knowledge i had no idea that for my minimum contribution of £50 i get an extra £12.57 tax relief. I had no idea what tax relief is!
That the 'Effect of deductions' on the first years contributions of £1357 is just £7 but in year 29 the 'Effect of deductions' is a whopping £20,900 on the contributions of £40,493!! Wow that is a huge sum!!( Not yet a total moneysaving expert...but im trying!!0
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