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pension miss sold?
Comments
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Well the pension provider is still behaving similarly. Received a letter with projections recently, 3% 5% 7% growth basis, and a caveat that investments go down as well as up.
Excellent. The FSA rates are 5%, 7% and 9% as a maximum. So, the rates used are realistic and the correct risk warning is present.I hope OFT and FSA are reading this, as they would be the ones to review and consider if the information Pensions providers prepare gives a clear reflection of the reality.
The FSA does review the example projection rates to be used every few years with a view to what level they should be set at to reflect economic events for the medium to long term. The OFT has no remit here.What I think pension providers should have an obligation to use realistic percentages in their letter illustations.
They do.
The last decade has generally been considered a poor period for investments. Yet after charges, the sector average of the balanced managed sector has been 4.52%. That sector dominates pension provision as the balanced managed fund is typically the default fund of many schemes. So, 3, 5 & 7 seems entirely realistic.They could use the last 10-15 years as a trend and average it.
I just did use the last 10 years and you can see that it virtually hits your middle rate on the example. Not bad for bog standard investment fund return. For reference, 15 years takes it to 4.89% after charges. (source Fin Express analytics)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 -
Yet after charges, the sector average of the balanced managed sector has been 4.52%.
Out of interest, what's the standard deviation? Averages alone tell us very little.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 -
gadgetmind wrote: »Out of interest, what's the standard deviation? Averages alone tell us very little.
Quite right!
Quoting on uniform growth rates regardless of the investment is also silly.
The mean is one thing, standard deviation adds to this, but a simpler way of testing risk tolerance is show the worst histotrical returns on similar assets over different set periods of time (the worst ones are usually in the shortest time periods). If this does not match your appetite for the given average return, then you may conisder different investments.0 -
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