Financial advise advice

Mackey24680

What insurances should I look for in a financial advisor. My parents are about to retire and have £100000 in my fathers pension pot.Now new rules say he can take the money and reinvest it. They have seen a financial advisor and he will invest the money for them. I know the details I have just given are a little vague but I have only just found out this was their plans. What insurances guarantees should they seek out so their money doesn't disappear into thin air. The company is registered at company's house as a limited co but is there some sort of government guarantee or government recommended company's? Any info would be great thanks
Ps they are a member of the fca

dunstonh

What insurances should I look for in a financial advisor.

An IFA or restricted but whole of market adviser will have access to most mainstream insurances.

new rules say he can take the money and reinvest it.

Doesnt mean its the right thing to do. Remember that a pension is already invested in a tax free way. So, taking it out and paying tax to invest it again in assets which are available to the pension may not be a sensible thing to do. It all comes down to tax calculations.

What insurances guarantees should they seek out so their money doesn't disappear into thin air.

Plans that use insurance to provide guarantees tend to be expensive and in these days of low investment returns, the costs are often not worth it. Usually better to invest appropriate to risk level and accept mainstream investments or cash.

The company is registered at company's house as a limited co

That means nothing.

but is there some sort of government guarantee or government recommended company's?

The Govt doesnt recommend any company and anyone making such a claim is usually a scammer.

There are around 50,000 conventional options. so its difficult to narrow down discussions on each of these on limited info. However, as long as the adviser is an IFA or restricted but whole of market adviser and products/investments are mainsteam, then you should be fine.

Also, you are not investing in the adviser company. They invest in investments operated by fund houses, platforms or insurers.

There is a limited protection offered by the FSCS but it doesnt really add much benefit to mainstream investments.

jamesd

How did they get in contact with the firm? If the firm phoned them out of the blue, do business with someone else instead, use unbiased.co.uk to find an alternative.

A firm being FCA registered is good. If you tell us the name of the firm we can look at the registration and their web site to see what we think.

The investment choices are key. Things that should prompt great worry are foreign property, woodland or green carbon dioxide saving forest investing or storage units, which are quite common scams.

If you can tell us how the financial advisor is proposing to direct them to invest the money that would be useful, so we can ensure it makes reasonable sense.

Taking all of the money out at once to reinvest it would be crazy. This is because £75,000 of it would be added to his taxable income in the year he took it. That means a lot of tax at 40%! Just moving to another pension would be OK, though. So would be gradually taking it out only at basic rate income levels.

If either of your parents is close to state pension age one great thing to do is defer claiming the state pension. If they reach state pension age before 6 April 2016 that produces a 10.4% increase per year deferred, between 50% and 75% typically inheritable by a spouse. If after that, a 5.8% increase, not inheritable by a spouse. All inflation-linked. The long term performance of the UK stock market is growth of around 5% plus inflation so this is even a better deal than investing in that. Deferring does share the same disadvantage as buying an annuity, the money is spent and not available for possible inheritance. I'm assuming reasonably good health.

Mackey24680

My parents contacted them as they are local and fca registered so it wasn't a cold call or anything like that. I'm sure they arnt taking all the money out the £100000 is just the total pot. My main concern was a con man walking away with their money. The company is Phoenix independent financial Services ltd I'm sure it's all above board just want it checking out and wasn't sure how too.

xylophone

http://www.phoenix-ifs.co.uk/index2.html

Seem to be independent/whole of market Financial Advisers.

What are their proposals for your father's pension?

When does your father become eligible for his state pension?

What is your mother's situation? Does she have pension provision in addition to state pension? When does she become eligible for state pension?

Where is your father's pension at the moment? What options are offered by this company?

sandsy

Advisers generally don't have access to their clients' money. The adviser will make a proposal which may involve your parents investing the money in different type of investments, either with a life insurance company or with fund managers, the latter are usually accessed through an administrative service called a platform where all the different investments with different fund managers can be seen one place. Your parents would arrange for their money to go straight to the underlying investment.

jamesd

Seems reasonable so far. Since they are legitimate IFAs they will have substantial protection from the Financial Services Compensation Scheme in really nasty cases like theft or fraud that are extremely unlikely. There would also be the opportunity to complain to the Financial Ombudsman Service if advice given was inappropriate for the needs, circumstances and ability to deal with ups and downs of investment value (often called risk). Optimal income tends to be payable when a drop of 30% or so in a bad year is accepted, along a roller coaster in reverse sort of path but lower levels with lower income potential can be obtained by adjusting investment choices.

TH1878

Mackey24680 wrote: »

What insurances should I look for in a financial advisor. My parents are about to retire and have £100000 in my fathers pension pot.Now new rules say he can take the money and reinvest it. They have seen a financial advisor and he will invest the money for them. I know the details I have just given are a little vague but I have only just found out this was their plans. What insurances guarantees should they seek out so their money doesn't disappear into thin air. The company is registered at company's house as a limited co but is there some sort of government guarantee or government recommended company's? Any info would be great thanks
Ps they are a member of the fca

Why on earth would you take money out of a pension where it grows tax free, pay tax on the withdrawal and then put it in an investment where it's taxed!?

Keep it in the pension and invest it until your parents need to draw an income from it.