An old question?

Shhh_2

You may have covered this before (several times?) bur despite going back a few pages I didnt really find anything helpful.

I am 40, self employed and have my personal pension split over 4 companies (NPI, Scot.Widows, Nat.Mutual & Nor.Union), 3 of which are "With Profits" funds. My IFA has said that for 5 years, these have not been doing much at all, nor are they likely to in the forseable future. He suggests changing but didnt specify what to (just out of "with profit") and suggested I go away and check out "With Profits" online and get back to him for further advice if I wished.

Like so many people I am a bit peeved (it was the IFA that suggested these in the first place) and if I switch now...will I regret it in later years, should I just hang on? I know each case is individual but can anyone offer general advice on this subject. If I cashed them ion how should I reinvest? Does anyone have an alternative to a personal pension?

Any advice gratefully received.

dunstonh

Like so many people I am a bit peeved (it was the IFA that suggested these in the first place) and if I switch now...will I regret it in later years

With profits funds have not necessarily been a bad thing. Over the last 10 years, even with the reduction in bonuses, a half decent with profits fund has performed better than the average balanced managed fund (which is where you would have ended up had you gone to a bank.

, should I just hang on? I know each case is individual but can anyone offer general advice on this subject.

Going forwards, the new solvency and regulatory requirements mean the providers have changed the way they invest the underlying with profits fund and this has reduced the potential for future growth. So what was good once upon a time is no longer the case for everyone. However, some providers do still have good with profits funds which can be suitable for some people (NU unitised with profits fund post 2002 version and Pru)

If I cashed them ion how should I reinvest?

You cannot cash in a pension. You can alter the funds it is invested in or redirect the contributions into other funds. Or you can bit the bullet and transfer to a new provider and choose from their funds. This may or may not be the best option depending on the type of guarantees and charges the old and new plan has.

Does anyone have an alternative to a personal pension?

Two other mainstream variations. Stakeholder pensions are a variation on the personal pension. The charges on these may be lower or higher depending on the circumstances. SIPPs can be ideal for those with greater investment knowledge and wanting a more hands on approach.

ISAs could be considered as a supplement but depending on your tax status and whether you benefit from extra childrens/working tax credit because of pension contributions, you may find these do not provide as much. A combination of pensions and ISAs is often a good idea but again, it depends on circumstances.

DavidLaGuardia

Many With Profit funds are worth less than the sum of nominal values of each policy, meaning they have to apply a Market Value Reduction on withdrawals to proect the remaining investors. There is a possibility that these may be removed if and when fundsrecover (and some remove it at retirement). The downside is that while waiting you may suffer lower growth rates meaning you might have been better off taking the loss earlier. Closed funds such as NPI are more liekly to have poorer returns as they need to switch to lower risk assets to protect the liquidity of the fund and future retirement values. It can never be an exact science as they way in which with profits funds are run varies enormously, is seldom transparent and quite frankly often no better than "smoke and mirrors" tricks
As you are only 40 you have a fair chance of recouping any reductions on transfer. As we are generally in a lower charging market because of stakeholder, you may find that a new pension has better projected values from the lower transfer than your existing provider using the SAME growth rates. If the new one gives a slightly lower projection then you can still consider the argument that it may have better growth potential and your IFA should be able to tell you what this would be and how plausible or riksy it is.
Be sure first to check if your existing policies have attractive guaranteed annuity rates as these wereset at a time when rates were a lot higher.
Having suffered a Market Value Reduction on my own funds that I transferred, I adopted the attitude that it was not as bad as the drop that had been suffered in the average managed fund over the same period so the With Profits fund had worked after a fashion, and I was glad to have been in it. But it was the future I was now interested in and it wasn't going to be in With Profits.
Ultimately, your IFA should be giving your more information and should be clear about any losses or risks.
My own pension is now a miixture of property and equity funds for growth that I intend to move gradually into safer funds when I am closer to retirement.

EdInvestor

Shhh wrote:

I am 40, self employed and have my personal pension split over 4 companies (NPI, Scot.Widows, Nat.Mutual & Nor.Union), 3 of which are "With Profits" funds.

Hi Shh,

As mentioned you and your IFA need to first make some checks on each pension.

1.Does the plan attract any valuable Guaranteed Annuity Rates or Guaranteed Investment Returns (and what % are these)?

2.What penalties might you have to pay if you transferred these funds to another lifeco pension plan or a SIPP ( so get a "transfer value" from the lifeco for each pension)

3.What charges are you paying on each fund? (Obviously you want low charging ones, but if you have valuable guarantees, higher charges might be worth paying.)

4.Specific to the With-profits investments, what percentage of the WP fund you are in is invested in equities?

Once you've got all this info, come back here and we'll take a look.

Shhh_2

Thanks guys for your replies, I am trying to take it all in, certainly I know that I need to deal with this and not ignore. I will do as suggested and get some more information from IFA and, if you dont mind, come back to you. The NPI fund appears gloomy from what I have read, the others, Scottish Widows, GE(Natuional Mutual) and Norwich Union I am less sure about.

Aint life complicated