Pension fund review confusion

mrbells

I expect I am one of many who, full of good intentions, aim to review their pension yet fail to take any action.

I currently contribute into a works pension with Scottish Widows, which is 'managed' by an appointed third party.

I have previously (about 12mth ago) reviewed my position in respect of where the funds are allocated with a view to changing the allocation if deemed necessary. The advisor did indeed suggest moving all funds but I never proceeded.

My concern is, how do I know what they are advising is good advice? Surely an IFA would only be interested in advising should there be scope foe taking my business, which I don't have the option to do given the current arrangement.

My funds are currently split as follows -

SW Fidelity American Special Situations - 15%
SW Fidelity SE Asia - 10%
SW Newton Oriental - 10%
SW Threadneedle European Select - 15%
SW Artemis UK Smaller Companies - 30%
SW Jupiter UK Growth - 20%

Now this doesn't mean a great deal to me but what does, is when using the MAS pension calculator to determine possible future returns, it advises that I have a shortfall. Hence, I wonder whether the growth may have been better if placed elsewhere.

So, the question is, do I trust the advise provided or is there another way for me to approach this?

If it helps, I am 46 and the current value of the pot is c.£75K, I contribute £120/mth and my employer £90.

All advise appreciated.

Thank you.

dunstonh

y concern is, how do I know what they are advising is good advice?

IFAs account for under 0.5% of complaints at the FOS. Most of which are rejected. Whilst that guarantees nothing, it does indicate there are not really any major areas of concern. If the advice is mainstream (i.e. using recognised investment funds houses and regulated investments and not dodgy stuff like eco fuels, forestry or land) then its likely to be in the ballpark.

Surely an IFA would only be interested in advising should there be scope foe taking my business, which I don't have the option to do given the current arrangement.

An adviser is paid to give advice. As long as you paying them then they will give the advice.

Now this doesn't mean a great deal to me but what does, is when using the MAS pension calculator to determine possible future returns, it advises that I have a shortfall. Hence, I wonder whether the growth may have been better if placed elsewhere.

Shortfall calculators are based on an assumed growth rate using your current contribution and current value and a range of other assumptions. A shortfall is because you have not paid enough into it to hit the chosen target you desire.

So, the question is, do I trust the advise provided or is there another way for me to approach this?

Seems your issue is more of lack of funding on your part rather than the investments being used.

If it helps, I am 46 and the current value of the pot is c.£75K, I contribute £120/mth and my employer £90.

And there is your problem. £75k for a 46 year old is low. £210pm is low for someone that is already behind. (assuming there are no other pensions - if there are then they need to be factored in too).

mrbells

Thank you,

That is very helpful if a little concerning.

I fully accept responsibility for not having addressed this earlier but I am sure I speak for many who are in a similar position.

I suppose what I am guilty of is not understanding where my pension should be at any given time i.e. You have identified that at my age, the value of the pot is low, yet I fail to see how I was supposed to know this or know what tools and/or information existed to highlight the shortfall, thus allowing me to take action earlier than now.

Is it fair to assume that the IFA employed to manage this scheme should be making such recommendations?

Is there any guidance as to what an individual should be aiming for in terms of pension value at a given age for a specified expected return?

Based on your views, is my only option to plough more money into the scheme to make up the shortfall?

Thanks again.

Notfarfromtheborder

Reading between the lines, the advisor you saw was employed by the 'third party'


If that is the case then there is the possibility your employer maybe pays them for their time in offering basic level advise when it comes to pensions, that is how things work with my employer and 'third party'


Your advisor could just have been offering advice with regards to your attitude to risk / circumstances rather than trying to sell you anything and further benefit. Whilst not with Scottish Widows, I can swap and change my funds to my hearts content should I wish, with or without my advisor's advice.


If they offered advice to move funds and you then decline their advice it appears strange you now questioning whether their advice was correct and wonder whether you may, in fact, have been better off taking the advice.


If you look back over the last twelve months you could find their advice wrong as you could probably have had better returns elsewhere in the market.
On the flip side you could find their advice was right as you could probably have had worse returns elsewhere in the market.


Looking back is not the way to look, look forward and make investment decisions based on what you know now.

Notfarfromtheborder

Crossed post Mr Bells


Few questions that would help


What age do you wish to retire at, what income do you want in retirement, have you other savings / investments / debts / mortgage etc. What will your state pension be? What is your Current tax rate, is your scheme salary sacrifice?


I'm no expert, but similar in age and planning myself at present

Linton

How much you need in your pot depends on how much income you hope to have in retirement and when you want to retire. You could have a play with a pension calculator, H-Ls for example, to get some idea of the monies involved.

An IFA employed to manage the scheme would almost certainly be limited to managing the scheme. They couldnt provide unasked for advice and in any case wouldnt know your circumstances - perhaps you have a vast amount of savings.

If the calculator shows that your pension pot is unlikely to provide the retirement income you need the answer is almost certainly to save a lot more: a change of investments isnt going to do a great deal better than your current ones which are already somewhat adventurous.

kangoora

The post above covers most of the most important questions, the biggie being how much do you want in retirement as it drives all of the other questions.

For example, on your current contributions you will have a pot of £75k plus £53k in contributions if you work until 67. Adding some investment growth it could be £150k, which could be more or less than this amount. A safe withdrawal rate to preserve your capital is commonly reckoned to be 4%, on £150k that would be £6k/year.

If you are happy to work until retirement age and then live on circa £14k/year pension (this includes state pension guess of £8k/year) then you might be fine. If you want to have £24k/year income in retirement and/or retire early then you need to take a serious look at how much you need to save up starting very soon running up to your forecast retirement age.

dunstonh

Is it fair to assume that the IFA employed to manage this scheme should be making such recommendations?

Only if they are employed to do so. Many are there just to facilitate the admin. However, some will go further.

Based on your views, is my only option to plough more money into the scheme to make up the shortfall?

Yes. There is no other way. However, you have to understand the assumptions being used to ensure they are reasonable assumptions. Garbage in, garbage out otherwise.