Virgin money

Paulie29

Looking into setting up pension.

Are Virgin Money any good ? They charge a 1% annual fee, is that good ?

Don't know we're to start really but like the Virgin brand.

Although I have made a appointment to see a IFA next week, but don't know if I trust what they tell me, are IFAs just glorified salesman ?

Not sure if this question has turned into a rant!!!!

Cheers

Paul

dunstonh

Are Virgin Money any good ? They charge a 1% annual fee, is that good ?

Just about the worst stakeholder pension going. Expensive for DIY and investment options low quality.

Don't know we're to start really but like the Virgin brand.

And that is why they get business. Brand, not product.

Although I have made a appointment to see a IFA next week, but don't know if I trust what they tell me, are IFAs just glorified salesman ?

You are buying advice from an IFA. The product is a secondary thing and doesnt contain any commission (unlike the Virgin stakeholder). An IFA should be able to easily beat the Virgin product in both quality and cost.

whitepaper

Paulie29 wrote: »

Looking into setting up pension.

Are Virgin Money any good ? They charge a 1% annual fee, is that good ?

Don't know we're to start really but like the Virgin brand.

Although I have made a appointment to see a IFA next week, but don't know if I trust what they tell me, are IFAs just glorified salesman ?

Not sure if this question has turned into a rant!!!!

Cheers

Paul

I can only give you my experience.

After leaving a well established employer I had worked for for almost 10 years since leaving school and their generous final salary scheme, I sought the advice of a local IFA.

I wanted to know what options were available as regards future pension planning as I really had no idea.

I paid the IFA quite a large sum of money and he advised me to take out a pension with Scottish Mutual, explaining how, based on past performance figures over various periods (1 year, 5 years, 10 years etc) it had been a really good performer.

I couldn't really understand the extremely complicated charging structure Scottish Mutual applied, or more importantly reconcile them with the predicted growth forecasts I was provided. I went back to the IFA with my growth forecasts based on the assumed growth rates he had used and including the charges as I thought I understood them.

I asked the IFA to try to explain why my growth rates were significantly lower than the ones he supplied.

I remember his reply was simply that he was no mathematician, but simply assured me that the growth rates he supplied were fully compliant with the regulations and therefore correct. Consequently my calculations must be incorrect.

I also remember asking about the assumed year on year growth rates at the time which I thought were quite high, averaging them out over the long term (i.e. 30-40 years, rather than a maximum of ten years)
I was told the growth rates were again compliant with the regulations and possibly reflected the exponential growth in share prices being seen.

This was all in the 1990's. Remember the way share prices were shooting up what with the .com bubble?
I was young and naive but trusted my IFA.
He came highly recommended and I had used him previously to arrange a mortgage when I moved from my very first house to another.

I would say he came up trumps then and got me a very good mortgage deal, one from a large building society at the time although initial discussions with that building society at the local high street branch suggested they would not lend me the money I wanted. He used a branch in another county to arrange the mortgage through.

Along with the mortgage, he advised me to take out a top-up endowment policy with Sun Alliance. This was a with profits policy, which the other endowment policy was not. He was adamant a with profits endowment was the was the way to go.

He said the other policy I had was poor as it was equity based and so I could easily lose any growth, whereas with a 'with profits' endowment once the profits were earned, they were locked in for the life of the policy

Now this was obviously at the time when endowment mortgages were all the rage.
My first endowment policy was designed to pay out £50k, the second he sold me was designed to pay out £25k - both came with the expectation at that time they would probably give me lots more at the time of maturity, but that would depend on future growth rates.
I didn't know any better, but saw the price of the policy he was selling me was about half the price of the previous one (reflecting half the intended maturity value) so went with his advice.

Well, its now 25 years on and the first policy from Reliance Mutual (the one he said was not very good) has just matured. It paid out £42,500, so 85% of it's intended maturity value.

The Sun Alliance policy (now Phoenix) one matures in about 18 months time. I'm going to be lucky to get £12500 from it compared to the £25k it was intended to produce. i.e 50%

Hindsight is a wonderful thing, isn't it?

Anyway, back to the pension I trusted him to arrange with Scottish Mutual. I paid in several thousand pounds lump sum to get it started, opted out of serps and had that paid into this private scheme, and agreed to a regular monthly payment.
All as advised by the IFA.

Well after about 5 years, I didn't seem to be getting any growth, let alone the growth he had suggested I would be getting. I paid more money to him for further advice. He advised I paid another sizeable lump sum into the pension to make up the shortfall and put the policy back on track.
Well this was the IFA advising me, and whilst I was becoming more aware of things, I followed his advice and handed over more money.

Another 5 years on, still no significant growth - Id have earned more in a deposit account even paying the tax!

I lost trust. I saw the Virgin pension deal, and on my own decision transferred the whole amount.

I've never looked back
Growth has now been at least in line with, and in may years has exceeded, my expectations. :beer:

It may not be the best deal on the market, but it tracks the entire FTSE (not just the FTSE100, or some other specialised area, or as Scottish Mutual did, paid for a very expensive money manager to gamble my money on whatever he thought would win ... and lose. The money manager doesn't care, he still gets paid!)

I also opted back into Serps but as Virgin explained I couldn't send the money in my private pension that came about by opting out of Serps back to Serps - so I asked them to look after that for me too, but that I would not be adding any more to it.

It was all so much easier to understand everything with Virgin and I wasn't paying them any money for the explanations.
You don't get any advice from Virgin, just explanations. But I think I think I could well do without paying for advice that lost me a heck of a lot of money, not just in fees

I know there is an ongoing management fee, but so there was with Scottish Mutual only Scottish Mutual's was much higher.
I also know it may not be the cheapest but I am happy.

This is my advice based on my personal experience.
As I say, I know it may be possible to get a better deal elsewhere, but I like the simple ways Virgin operates and explains things and I'm not trusting to someone I don't know 'gambling' my money which is the way I felt was happening with the IFA's recommendation of Scottish Mutual and the "managed" policy I was advised on.

Overall, as you can see, that IFA has cost me a lot of money both in direct fees and the poor performance of the products he sold me (apart from the interest only mortgage which I later changed unadvised to a lifetime tracker - paying less than 1% p.a for the last few years
In fact the adviser at the BS told me it was a bad choice when I told him that was what I wanted, but I was adamant that was what I wanted.)

Now I'm not suggesting any of the advice provided by the IFA was poor. It was all backed up by facts & figures and the important phases " the value of your investment may go down as well as up" and " Past performance is not a reliable indicator of future returns and you may not get back your original investment."

I suppose I had hoped my IFA was taking these warnings into consideration when advising me suitable products - but it seems more of their 'get out of jail free card' to be played whenever the need arises.

I'm not saying my situation is typical of all IFAs, but it is genuine.

Neither am I an IFA who is advising you to go and see an IFA :cool:

All I can advise, with the experience I have gained, is do your own research and go with your own gut feeling. In my case it would have proved much more profitable, and even if it hadn't, I wouldn't be left feeling as though I lost out financially by trusting some one else.

theGrinch

high charges, low performance. its been like that for a decade or more, but many go with them just for the brand. avoid.

xmodz

theGrinch wrote: »

high charges, low performance. its been like that for a decade or more, but many go with them just for the brand. avoid.

what high charges i thought all pensions were only allowed to charge 1.5% AMC for the first 10 years

jem16

xmodz wrote: »

what high charges i thought all pensions were only allowed to charge 1.5% AMC for the first 10 years

That's only for Stakeholder pensions which are becoming outdated and almost obsolete. Most personal pensions can easily beat that on charges.

As to Virgin - yes it's expensive for DIY and very poor fund choice. It uses a UK Index tracker which, performance wise, comes out as 274th of 276 funds.

Price wise it's charging 1%pa for an Index Tracker when you can get the likes of HSBC trackers for 0.37%.

It's easily beaten both in price and more importantly performance. Avoid like the plague.

To be honest, as the OP has managed to pick the worst DIY option available, seeing an IFA would probably be the best option - and no I'm not an IFA. :cool:

dunstonh

I lost trust. I saw the Virgin pension deal, and on my own decision transferred the whole amount.

Not a great decision though. Expensive and poor investment options. Certainly the old 1990s product was pretty much obsolete by the early 2000s but then early 2000s products are frequently obsolete by 2012 standards (exceptions apply). They are just like any retail product. How many other things from 1990 are you still using?

whitepaper

dunstonh wrote: »

Not a great decision though.

You may not consider it was a great decision, but hindsight is a wonderful thing isn't it, and sadly no one can be sure what the future will bring.

It was hindsight that the IFA used to sell me the underperforming product in the first place.
If I had stayed with that, then I would be looking forward to a very poor old age indeed.

I'm happy with the decision I made. If I wasn't I would change it again.

Of course, I could have spent more good money asking an IFA to suggest more good options ... but they can only tell you what has happened in the past, and as Virgin explain, whilst managed funds often can produce great returns in the relative short term (1 year, 5 years, even possibly 10 years) they rarely if ever outperform the stockmarket over the longer term a pension is deigned for.

dunstonh wrote: »

How many other things from 1990 are you still using?

So what would you suggest I do with my extremely poor performing endowment policy sold to me by the IFA that was designed after 25 years to at least give me double what it will (and the hope at the time of sale for so much more)?

I did ask the IFA what to do about it about 10-15 years in and the advice given was to see it to it's maturity as cashing it in mid term would result in even greater losses.
That's why he sold me a top-up one in the first place, rather than advising me to cash in my earlier "bad policy" (as he called it at the time) I had that actually ended up performing better.

Looking back now, I would almost definitely have made more money just putting the monthly premiums into a savings account than with the 'with profits' policy he sold me. As I said, hindsight - such a wonderful thing.

jamesd

xmodz wrote: »

what high charges i thought all pensions were only allowed to charge 1.5% AMC for the first 10 years

Stakeholder pensions are allowed to charge up to 1.5% but allowed to does not mean must. It's easy to get tracker funds at lower prices than that. Say 0.55% for the BlackRock FTSE All Share Index tracker from one popular but somewhat expensive retailer.

whitepaper

jem16 wrote: »

As to Virgin - yes it's expensive for DIY and very poor fund choice. It uses a UK Index tracker which, performance wise, comes out as 274th of 276 funds.

Price wise it's charging 1%pa for an Index Tracker when you can get the likes of HSBC trackers for 0.37%.

It's easily beaten both in price and more importantly performance. Avoid like the plague.

To be honest, as the OP has managed to pick the worst DIY option available, seeing an IFA would probably be the best option - and no I'm not an IFA. :cool:

I know this is looking at past performance, and I again reiterate the issues with this, but I don't really know of any other way to compare things.

And I don't even know if I am looking at the correct figures here but:

HSBC all share tracker:
1 year - 11.76%
3 years - 29.92%
5 years - 25.71%

Virgin Pension Growth
1 year - 12.3%
(Virgin tells me, according to Morningstar Work Station, it was only 11.1% for 2012 :huh:)
3 years - 30.6%
5 years - 29.3%

jamesd

You've used a version of the HSBC fund with a 1% annual charge and 5% or so in money market instead of index investments and compared it to a Virgin version with 1% charges and 100% invested.

For lower fund cost (but a platform charge at HL to add) the HSBC FTSE All Share index institutional units did 12.44% over one year, 32.61% over three and 30.21% over five.