Pension advice please/commission charges

hethmar

Well, as all you knowledgeable people have pointed out this is a structured investment and as such quite high risk as far as I can see. The counter parties failure would lead to loss of the investment with no recourse to the Financial compensation which we believed would cover us

dunstonh

hethmar wrote: »

Well, as all you knowledgeable people have pointed out this is a structured investment and as such quite high risk as far as I can see. The counter parties failure would lead to loss of the investment with no recourse to the Financial compensation which we believed would cover us

Only deposit based get FSCS protection but their rates are so poor that you wouldnt normally be interested.

I've said it before but the FSA came up with a good practice that no more than 25% of your investible assets should be in structured products and no more than 10% should be with any one market counterparty. if any adviser recommends outside of that then it could easily be a complaint in waiting as the FOS tends to follow FCA publications.

If you think about it, a stockmarket linked investment (say UK equity fund) can lose 40% in a year. So, losing 10% if that market counterparty fails on a stockmarket linked SCARP would not be a disaster. If the terms are attractive and the counterparty strong then a SCARP can make a good addition to a portfolio. However, the terms only tend to be attractive at given certain points in the economic cycle. Many here will remember that 13% Premier ones. A couple of years ago you could get 8-9%. Now, the terms are not great for the level of risk... in my opinion.

hethmar

but Dunstonh, please, I cant understand how that would only be a loss of 10% ? If the lone counterparty failed then surely the whole of the capital would be lost?. The IFA told us that probably 90% would be on deposit but the paperwork doesnt mention this - only that we could lose all our capital and that there is no recourse to the £75k back up?

We cant then say but we were told most of it is on deposit when the paperwork doesnt say that.

dunstonh

hethmar wrote: »

but Dunstonh, please, I cant understand how that would only be a loss of 10% ? If the lone counterparty failed then surely the whole of the capital would be lost?. The IFA told us that probably 90% would be on deposit but the paperwork doesnt mention this - only that we could lose all our capital and that there is no recourse to the £75k back up?

We cant then say but we were told most of it is on deposit when the paperwork doesnt say that.

If done correctly, only 10% of your investable capital should be with one market counterparty. So, if that failed, then that would be why only 10% would be lost (as you only invested 10%. The other 90% would be in other investments).

If investing more than 10% then its a high risk (to both adviser as its a risk of mis-sale) and to you as it would mean suffering a greater loss.

Malthusian

Dunstonh is correct to say that if only 10% of your portfolio is invested in a structured product and the issuer defaults, it's not necessarily disaster. But for completeness I would point out that if you have 100% of your investment in (let's say) a FTSE tracker fund and it falls 40%, at some point the value will recover (historically, within about five years). Particularly given that even if share prices fall 40%, most of the firms within the FTSE will still be paying dividends. If you have 10% of your fund invested in a structured loan and it defaults, that 10% is gone. Five years later it will still be gone.

None of what you've said makes much sense to me, to be honest. If he's recommending holding 90% on deposit and only investing 10% in the structured product then regardless of how well the structured product does you'll earn nothing on the 90%. An annuity would give you a better return than 90% in cash and 10% in a structured product paying 8%pa even in the best case scenario (albeit at the expense of losing the capital on death). Anyway that contradicts when you said earlier that you were going to invest £150,000 in this structured product.

Out of interest, have you discussed your concerns with whoever it was that recommended the IFA to you? Did they get a similar recommendation and are they happy with it?

hethmar

We were told that the pension capital would have a large american finance co/bank as counter party and would earn 8% per annum on a 6 year plan with "kick out". I feel unhappy that depite emphasising our cautious attitude we were assured this was a safe place for the money.

He did ask how much else we had money wise apart from this pot but we thought this was because the pot would be tied up and not usable.

I am surprised that anyone could contemplate the possible (however remote) loss of the whole pension pot as being a safe investment? I keep thinking Im not "getting it"

jem16

hethmar wrote: »

I am surprised that anyone could contemplate the possible (however remote) loss of the whole pension pot as being a safe investment? I keep thinking Im not "getting it"

I think people are saying that only 10% of your pension pot should be in this, not the whole lot.

hethmar

Many thanks for your kind interest everyone.

It appears we may be talking structured deposits? rather - is that safer?

jem16

hethmar wrote: »

Many thanks for your kind interest everyone.

It appears we may be talking structured deposits? rather - is that safer?

Seems unlikely that it would be paying 8%pa then. Perhaps you could actually name the product rather than us all stabbing about in the dark.

LHW99

You have mentioned:

Now this time I look on recommended IFA lists and this guy comes out very highly recommended.

Have you actually checked that this gentleman is a regulated (independent) financial adviser?
Take a look at http://www.fca.org.uk/consumers/protect-yourself/unauthorised-firms