Move my pension pot?

Ali-OK

Hi all,

I've an old Pru PPP that's all in With Profits plus Contracted Out SERPS - started it in the early 90s. I'm still contributing to it and want to double what I save in a pension, so I engaged (and paid) an IFA in the Spring to find out if it'd be better to move it first due to lower charges since the new rules.

But looking at the illustration (Royal London advised) it was near identical to my current plan in potential return, so is it worth moving?

I'm self employed and 47, not planning to retire until 63, maybe later, so want to get my ducks in a row now.

Thoughts gratefully received.

dunstonh

so I engaged (and paid) an IFA in the Spring to find out if it'd be better to move it first due to lower charges since the new rules.

There hasnt been any noticeable reduction in charges since 2013.

But looking at the illustration (Royal London advised) it was near identical to my current plan in potential return, so is it worth moving?

Illustrations are assumptions and not actual returns. The assumptions are mostly set by the regulator. Hence why they are similar.

Royal London offer a good plan and if your old Pru plan is on the most common terms then the RL plan is probably around half its cost.

You IFA cannot move a plan for moving sake. It has to be justified. So, the advice from the adviser who has all the details is going to be better than the internet which has none.

What did your adviser say when you asked them this question?

Al.

I'm with Dunston, Royal London offers a well priced, well spec'd, well performing, cracking contract. Alas, my rep is still awol on maternity leave; she was a great help. Many companies have neglected this (to their detriment).

Ali-OK

Thanks both.

Dunston I was thinking of the changes and products charges from early 2000s (Stakeholder).

IFA said that due to WF being more a hidden charge taken off before bonus paid, it wasn't possible to give me an answer, other than it's still better than current plan by £2k. Funds couldn't be compared either.

Sounds like it's a good plan though, so I should stop over-thinking it!

Al.

Ali,

If you have paid this adviser, ask for the research and reasoning. If the benefit of changing isn't tangibly demonstrative, why do anything? Further, there are pros and cons of starting a new pension with the additional impetus you have planned for your retirement and running both parallel to each other. Have you discussed those?

dunstonh

Some years back, Pru equalised all their higher charging plans so they equated to 1% p.a. using a growth rate of 7%p.a. Due to the less transparent way their old WP fund worked, it wasnt an exact science. The difference (in charges in percentage terms) at the low growth rate comparison would be different to the higher rate.

At around £20k plus, the RL plan should be around 0.4% p.a. So, it should be very easy for the adviser to show a benefit to you if yours matches the typical.

The measurement on charges is calculated over the term (to your selected retirement age) using the same growth rates. The one with the larger fund value is the one with the lowest charges.

RL is not the cheapest. However, their governed portfolio options make it a good option for someone who isnt that interested in investments but wants a bit of structure and care. If you wanted the absolute cheapest, the adviser can get cheaper. However, the quality may be something different.

Another requirement is that the pension switch should consider leaving the fund where it is and redirecting premiums to a new plan. in my experience this doesn't often come out best but I have seen it on occasions. The main IFA software options automatically calculate it for the adviser so they can show it on their reports.

Ali-OK

Hmm....what I can summise from the Switch Report and Illustrations is:

The transfer pot would lose ground for the first 2 years of moving it with an overall outcome almost identical.

New contributions to RL after charges give a growth rate after all charges of 1.5%, transfer at 1.3% - that's Governed Portfolio 4 which is higher risk than the WP I think. New to Pru gives 1.1%

RL illustration shows 1% charges - 0.5% management and 0.5% adviser services charge on both transfer and new. And a £1k fee to the adviser from my plan (was £1,500 but have paid £500 already for work done so far, which would be taken off).

The critical yield difference/safety margin is 0.3% on 0% growth and 0.2% on 2.93% growth. Seems like very little in it.

The Pru PPP isn't doing too bad (I think) - bonus this year 4.25%, last year 5.75%. But the RL growth has been 10.8% and 5.3% respectively. Swings and roundabouts!

Would keeping the WF pot and setting up additional contributions to a different Pru fund be worth looking at?

Dunston - Keeping current Pru and starting just new with RL wasn't mentioned and isn't on the switching report.

I'm hoping to start dipping my toe in the water with investing and setting up an S&S ISA and probably some P2P/FC too. At the moment, I'm using current accounts (5% and 4% gross paying) and a 5% reg saver and a small amount in a Cash ISA - aiming to have a range of retirement pots.

Sorry for all the stats - it's helping me to work it out as I go along too

Al.

Ali-OK wrote: »

RL illustration shows 1% charges - 0.5% management and 0.5% adviser services charge on both transfer and new.

I understand the transfer costs and ongoing costs based on annual values. But on all new regular(?) payments in as well? I know it's permissible but even so, it's going to impact heavily on your final fund value.

Apols if I misinterpreted that.

dunstonh

Dunston - Keeping current Pru and starting just new with RL wasn't mentioned and isn't on the switching report.

The one we currently use puts both on the same report. The one we used to use did two outputs. Either way, you would expect the adviser written report (which is often issued post sale) to cover both.

I understand the transfer costs and ongoing costs based on annual values. But on all new regular(?) payments in as well? I know it's permissible but even so, it's going to impact heavily on your final fund value.

I'm reading it as 0.5% ongoing charge on the fund value which is the normal way of doing it. Not an initial charge made against the regular (which is not possible long term any more).

Would keeping the WF pot and setting up additional contributions to a different Pru fund be worth looking at?

The old pru product is not available any more. Your may have an increment option but many of the old plans are closed for increments.

Al.

I think RL still allows it in the paper application? I stand by to be corrected! On this occasion I seem to remember having to use the paper app post RDR and being faced with that fiendishly complex template. I use a set fee for all my pension advice and have done so now for a couple of years. On this occasion, I had filled in the incorrect box and applied an ongoing charge to the (beefy) regular contributions as well as the fund. Why, I have no idea - especially bad as I had illustrated 'normally'.

I then duly submitted on behalf of the client and then got a phone call from VB who had been browsing, asking about my intentions. I cringed and had to start again, it was particularly embarrassing because I needed to go back to the client and explain. Thankfully, she understood, but it was a lesson learned. Such a nice contract though; get above £27500 or so and it makes perfect sense. Great admin support too. Having said that, the Parmenion SIPP lite presents an interesting alternative.

Ali-OK

"Ongoing charges
These charges are for the ongoing services your financial adviser will provide.

Regular contributions: 0.50% each year of the plan value built up from the regular contributions, due monthly until your chosen
retirement date.

Transfer payment: 0.50% each year of the plan value built up from the transfer payment, due monthly until your chosen
retirement date."

Plus 0.5% management charge ongoing and initial charge to IFA.

So 1% coming out across all of it until retirement date.

Looks like I've still access to add to Pru WP as there's an enclosed illustration for extra regular or lump sum contribution.

Raises more questions :rotfl: