Personal pension or stakeholder?

genie_g

I'm looking at consolidating my existing stakeholder/personal pension/group personal pension into a single pension because it appears I can cut down on the charges I am paying. I have about 70K (plus £30K in a previous employer's defined benefits scheme - not sure what to do with that yet).

1. Does this sound sensible?

2. If so, personal pension or stakeholder? It seems stakeholder has lower charges but offers less choice of funds. But, I'm not a sophisticated investor - I want something simple - so stakeholder should suffice - fair enough?

Thanks

jem16

genie_g wrote: »

plus £30K in a previous employer's defined benefits scheme - not sure what to do with that yet

9/10 times a defined benefit pension is best left where it is. Very unlikely that any form of money purchase scheme would even come close.

To transfer a DB scheme you would need an IFA.

1. Does this sound sensible?

The consolidation of the rest could be sensible but you would really need to weigh everything up.

2. If so, personal pension or stakeholder? It seems stakeholder has lower charges but offers less choice of funds. But, I'm not a sophisticated investor - I want something simple - so stakeholder should suffice - fair enough?

Thanks

I would have though that a personal pension would be more suitable for a £70k fund. A better fund choice gives more potential for growth.

Much depends on what you intend to do with it. I see from your other thread that you are considering getting advice from an IFA. Will the IFA be employed on servicing basis or transactional basis?

genie_g

jem16 wrote: »

9/10 times a defined benefit pension is best left where it is. Very unlikely that any form of money purchase scheme would even come close.

To transfer a DB scheme you would need an IFA.?

Sorry - meant defined contributions scheme (it's getting late!).

jem16 wrote: »

The consolidation of the rest could be sensible but you would really need to weigh everything up.

What does 'everything' include?

jem16 wrote: »

I would have though that a personal pension would be more suitable for a £70k fund. A better fund choice gives more potential for growth.

Much depends on what you intend to do with it. I see from your other thread that you are considering getting advice from an IFA. Will the IFA be employed on servicing basis or transactional basis?

I want to invest it to provide the best possible income for my retirement in 15-20 years time. I do intend to make further contributions once I'm earning enough again (been on a career break for 6 years).

Re: basis - Don't know yet - that's another question! From what I've read on other threads I need to ask the right questions about the cost of advice. I've used IFA's before and to be honest, in terms of pensions, I've not really seen the added value though I have in other areas.

I've contacted two IFA's so far. The first took three days to return my call, we had a good conversation then though. He asked me to write to all the providers asking for various details which I've not had to do with other IFA's I've used in the past. However, I'm more than capable of writing letters and I'd rather do that than pay someonelse to do it (don't get me on to solicitors - grr!). He will come and meet me at home once I've got the information.

The second firm responded to my email enquiry by phoning me at 9am the next day. They are clearly a bigger firm and I'm going to a meeting at their posh offices later in the week. They sound very professional. However, I'm wary as these are the type of guys I've used before and I am afraid I'm going to be paying thru' the nose for their swanky offices/cars/suits!

dunstonh

I've used IFA's before and to be honest, in terms of pensions, I've not really seen the added value though I have in other areas.

The term IFA covers a multitude of business models. Old school are often transactional (see you once and dont see you again until you call them) whilst others are servicing and will rebalance the portfolios, tweak for economic cycle and risk changes etc. Some focus on higher net worth, some focus on mortgages and do investments on the side (replace mortgage with any niche area or specialist area).

Transactional isnt bad as long as you are aware that the advice is likely to be different to what it would be if it was servicing. More basic investments are likely to be used and probably more basic contracts. The advice has to reflect the current and forseeable future in respect of servicing and who is going to do it. if you dont use the IFA on servicing and you arent going to do it yourself then using a portfolio fund is the next option. However, these tend to be more expensive (in OEIC/UT form) as you are paying the fund manager to do the work or they tend to be more basic if they are cheaper (bog standard balanced managed funds for example). Neither is best advice or bad advice. The best investments are not suited to lazy investors (invest and forget) and experienced investors wouldnt want to be in lazy investor funds. The advice has to be right for the person. This involves decent communication in what you want from the IFA and whether you understand things or not.

The first took three days to return my call, we had a good conversation then though. He asked me to write to all the providers asking for various details which I've not had to do with other IFA's I've used in the past.

Normally the IFA writes after getting your authorisation. We know the questions to ask. You dont. If that adviser knows you are speaking to multiple advisers then that may be why he is asking you. If all the advisers end off the authorities at the same time then only one can be servicing agent with the provider and it can lead to not getting the information.

The second firm responded to my email enquiry by phoning me at 9am the next day. They are clearly a bigger firm and I'm going to a meeting at their posh offices later in the week. They sound very professional. However, I'm wary as these are the type of guys I've used before and I am afraid I'm going to be paying thru' the nose for their swanky offices/cars/suits!

It is a consideration. Big plush offices with lots of flash software and glossy brochures can look far more professional but costs far more money. You pay for that. You need to decide what balance you want.

I am not going to answer PPP or SHP as we cant say. However, on fee basis, you would nearly always expect PPP as SHP is geared to small amounts. PPPs have better fund based discounts on insurance company contracts and if you use platform pensions then they are either SIPPs or PPPs. Ironically, stakeholder pensions are not compliant with the 2013 RDR rules coming in. Yet the rules regarding stakeholder vs PPP for an adviser to consider are going to remain in place. Last year I did around 250 pensions, about 5 were stakeholders. 5 years ago it was around half. 10 years ago it was nearly all stakeholder. Thats how things change.

jem16

genie_g wrote: »

What does 'everything' include?

Transfer costs, ongoing amc, fund choice now and fund choice if you move.

genie_g

dunstonh wrote: »

Normally the IFA writes after getting your authorisation. We know the questions to ask. You dont. If that adviser knows you are speaking to multiple advisers then that may be why he is asking you. If all the advisers end off the authorities at the same time then only one can be servicing agent with the provider and it can lead to not getting the information.

No he didn't know that, I contacted the second IFA because I thought the approach of the first one (me writing for information) was unusual as advisers we've used before have done exactly as you describe - writing after getting authorisation.

That brings me to something that's always bothered me - is it the case that by signing an authority for an adviser to obtain information they automatically become the 'servicing agent'? Once I find out their advice and the cost of it I might not want to follow it.

How can I compare advisers if they all need to send off authorities which make them the servicing agent to get the information they need to advise me?

It seems like an assumptive close - they need information to advise me and to work out how much this advice will cost but, by giving them authority to obtain that information I am making them the servicing agent therefore transferring existing business to them.[/QUOTE]

dunstonh wrote: »

I am not going to answer PPP or SHP as we cant say. However, on fee basis, you would nearly always expect PPP as SHP is geared to small amounts. PPPs have better fund based discounts on insurance company contracts and if you use platform pensions then they are either SIPPs or PPPs. Ironically, stakeholder pensions are not compliant with the 2013 RDR rules coming in. Yet the rules regarding stakeholder vs PPP for an adviser to consider are going to remain in place. Last year I did around 250 pensions, about 5 were stakeholders. 5 years ago it was around half. 10 years ago it was nearly all stakeholder. Thats how things change.

Sounds like stakeholder is on the way out then! So what has happened to all those stakeholder pensions you did? Have you advised those people to transfer to something else?

dunstonh

That brings me to something that's always bothered me - is it the case that by signing an authority for an adviser to obtain information they automatically become the 'servicing agent'? Once I find out their advice and the cost of it I might not want to follow it.

That is normally the case. You can ask the company to remove that adviser as servicing agent if you dont appoint another one though.

How can I compare advisers if they all need to send off authorities which make them the servicing agent to get the information they need to advise me?

Stagger the meetings to allow admin to be dealt with.

So what has happened to all those stakeholder pensions you did? Have you advised those people to transfer to something else?

I used stakeholders for transactional clients. Not servicing clients. So, no. On hardly any have I advised them to change. If they wanted servicing then they would have been told to move on as I have done on a number of contracts over the years (as things do not stand still for long). However, if they dont want servicing then they are not going to get it.

genie_g

dunstonh wrote: »

However, if they dont want servicing then they are not going to get it.

Quite right - if I'm going to pay for it I wouldn't want others getting it for free!

Thanks for your input dunstonh on my various threads over the past few days. Had my meeting with the IFA this afternoon. Appointed him as servicing agent. Will wait and see what he comes up with...and at what cost.

genie_g

Well, here we are three months down the line.

IFA 1 was never heard from again.

I've had my second meeting with IFA 2 but don't think I know any more than I knew already or could have found out for myself by writing a few letters. Maybe I'm missing something? Also, I don't like what he's saying about commission v. fees (he wants to go with the former as 'nobody ever goes for the fee option'). I still don't know what he is going to advise except in very broad terms or how much it is going to cost.

So, I'm going to see IFA 3 on Tuesday - he only works on a fee basis. So I'll see what he has to say.

Onwards and upwards!