Attn Dunstoh Poor Pension plans

Ian_W

exil wrote:

How do I know what inflation will be over the next 30 years? Will there be a couple of world wars before I retire? Oil prices hitting the roof as we exhaust the easily exploited reserves? Massive unemployment?A collapse in property prices? Global warming? An asteroid hitting the earth? Frankly, I don't know. And neither does the most brilliant financial adviser in existence.

You missed out a pandemic! :rotfl:
Almost makes me glad to feel older and thus nearer the grave!!:eek:

EdInvestor

Ian_W wrote:

1. Why pick 20yrs when 40yrs or at least 30+yrs is more appropriate for a pension?

Personal pensions were only sold to the general public after 1988.

2. Why use "With Profit" when we all know from Endowment hind sight that it fails in a low inflation/interest/investment return era such as we have had over more recent years?

Because that's what the vast majority of PPs were invested in, as were endowments.

3. Why a lump sum when IIRC they weren't allowed for pensions 20yrs ago or at least, if they were, Inland Revenue rules limited them - wasn't 15% of salary the annual limit in those days?

Pass on the history of tax free cash, anyone?

4. Why would someone use a pension in a "fire & forget" way the article suggests?

Because despite getting paid trail commission, advisors offer no follow-up guidance?

My other opinion is that you should take what financial [or any] journalists write with a huge pinch of salt....

How would you compare the judgments of journalists with the information and guidance provided by the average advisor ( who probably works in a bank....)?

dunstonh

Personal pensions were only sold to the general public after 1988.

Retirement Annuity Contracts were available before that and RACs now more or less have the same terms as PPPs.

Because that's what the vast majority of PPs were invested in, as were endowments.

There are thousands of fund/investment options. Why pick on just one?

Because despite getting paid trail commission, advisors offer no follow-up guidance?

There is no trail commission payable on most pensions (only SIPPs and unit trust based personal pensions). Pensions generally paid upfront as a one off. Especially tied agent sales.

How would you compare the judgments of journalists with the information and guidance provided by the average advisor ( who probably works in a bank....)?

Journalists looking for sensationalist headlines and willing to not let the truth stand in the way of a good story. A bad journalist is no different to a bad adviser. A good journalist would not be as good as a good adviser.

Ian_W

EdInvestor wrote:

How would you compare the judgments of journalists with the information and guidance provided by the average advisor ( who probably works in a bank....)?

Much more reliable, Ed - after all it's aided by by the 21st century's most advanced science ...

Hindsight!

How many journalists were writing in the 80's about the likely failings of WP, personal pensions or endowments? Don't remember too many myself, in fact quite the opposite, but I'm happy to be corrected.

EdInvestor

dunstonh wrote:

Retirement Annuity Contracts were available before that and RACs now more or less have the same terms as PPPs.

RACs have high guaranteed annuity rates attached and are nothing like as badly affected by recent events as PPs - indeed one of the reasons PPs are doing so badly is that money due to them is going to fund the guarantees due on the RACs - Equitable Life was a very good example of that

There are thousands of fund/investment options. Why pick on just one?

As I said because that's where most of the money was invested.This is largely a With-profits problem - unit-linked plans are already bouncing back quite well, whereas many WP plans will never ever return to decent performance, as they are trapped in zombie funds..

dunstonh

Very few are actually trapped in zombie with profit funds. Most can get out either at zero cost or more commonly a transfer penalty can apply but this is normally no more than 15% and anyone who has done that in the last 4 years has broken even in 12 months or less and gone on to see better returns.

defender_of_the_weak

Was anyone posting on this issue actually advising in the 80's?

Lump sums could be paid to RACs or pps when they arrived also EPPs for directors
No you did'n't get trail you got renewal based on continuing premiums

Unit linked did not really arrive until the late eighties and even then With Profits was pushed as the default fund as most tied advisers (over 200,000 of them) could not recommend any particular fund.

Commissions were not generally paid as a one off, the key aspect was to build that renewal bank each year and then hopefully sell it on at a later date

The problem lies in the lack of training and the pushing of the sales people. Rarely, if ever were things put in writing that backed up the promises made in the sales pitch

As an aside, I met a mortgage broker the other day (they cold called me) and he wanted 2 grand to re-arrange my mortgage. He was woefully poor, nice bloke, no training.

exil

Sure - but no amount of training will turn an adviser into Nostradamus. We are however entitled to best advice given the knowledge available at the time we seek that advice.

chriskn

Hi,
I'm new here and as requested looked through old threads for the topic I am specifically interested in. I understand that I can't expect the returns I was promised in the 80's, but think a return that is less than 19% of what was offered (I choose the word carefully!) is worthy of some investigation.

I left a company pension scheme after 14 years, and decided the best option was to put the money accumulated into a one time payment with-profits policy with one of the major institutions. They gave me a prediction at the time, but of course no guarantees. Over the years regular bonuses were paid, albeit reducing all the time, until 2002 when no bonus was paid. The accompanying letter explained all about "smoothing" and how it was fairest for everyone. Unfortunately this smoothing has continued to pay 0% bonus despite the accompanying annual letter says all the investments are now doing well.

I have exchanged a number of letters with the supplier, including asking for the history of their bonus rates prior to my purchasing the policy so that I could understand how they could have made their initial forecast. They would have had to achieve an average annual bonus rate of 6.03% to meet their forecast, and yet based on their figures only the last two of the 18 years prior to the policy coming into force exceeded 6%, and the average over those 18 years was 4.89%. Surely smoothing policies should be equally applied during the selling process?

On their advice I took my complaint to the Financial Ombudsman, who told me it was outside the scope of the complaints they look at, as the policy doesn't mature until 2012. So I guess I'm stuck with it. The good news for me is that I do have other pension plans, but it is still making a hole and others may not be as fortunate.

EdInvestor

Does this policy have guarantees attached to it?That would be a reason for its apparently poor performamce.If there are guarantees, it will pay out much more than its face value would suggest and is not in fact performing poorly at all.

Which company is the provider and when did the policy start?