Weslyan?

ceewash

I have been advised to put my pension lump sum in Wesleyan with profits bond. Apparently investments cannot go down and it has consistently has been performing very well. A no brainer? Unless anyone can tell me otherwise.

Drp8713

ceewash wrote: »

I have been advised to put my pension lump sum in Wesleyan with profits bond. Apparently investments cannot go down and it has consistently has been performing very well. A no brainer? Unless anyone can tell me otherwise.

Few questions;

Who advised you? An independant financial advisor or a sales person who works for that company?

Why are you taking the pension lump sum? You are taking the money from somewhere it can grow free of CGT and is free of tax on dividends/interest. What is the tax situation of the bond?

With profits funds just hold back some profits in the good years to smooth out the performance in the bad years.

Malthusian

For most investors With Profits is now somewhat outdated and essentially falls between two stools. If you are happy for the value of the investment to go down then for various reasons you would expect to do better in directly held collective funds. If you aren't then you shouldn't invest in With Profits as the insurer has the right to apply a market value reduction at its discretion in bad years.

Investment bonds are also less than ideal from a tax-efficiency point of view for the majority of investors.

I echo the previous poster - if you wanted this money to remain invested why did you take it out of the pension?

ceewash

I needed to take my pension as I had retired, that's not a problem. I just needed to know more about these bonds and why they appear to be doing so well. The adviser was not independant so hence the caution.

LHW99

Any illustration the salesman gives is just that - a pretty picture.

Its done based on standard projections, and has very little to do with predicting actual return.
Hence the reason many people took out with profits endowments hoping to pay off their mortgage, and then discovered there would be a shortfall. The projections looked good to start with, and then the situation changed.

ceewash

Yes we did this many years ago and got caught out with SL. When he said "with profits" it brought back memories of that.

xylophone

Why are you taking the pension lump sum?

Possibly compulsory? Some DB schemes still operate this.

The adviser was not independant so hence the caution.

If the adviser is not independent then it is wise to exercise caution.

How much is involved?

dunstonh

I have been advised to put my pension lump sum in Wesleyan with profits bond.

I think I have just popped in my Tardis and gone back to 1990.

Apparently investments cannot go down and it has consistently has been performing very well. A no brainer? Unless anyone can tell me otherwise.

As you have described it, this would almost certainly be a mis-sale.

Investment bonds are a niche investment wrapper rarely used nowadays. They can still fit a scenario but it tends to be larger investors placing funds into trust. S&S ISAs and unwrapped UT/OEICs come in the pecking order before investment bond until you have used up the ISA allowance and the dividends allowance.

With Profits is an obsolete method of investment. Barely any company offer it any more and those that do are not worth considering. There are a couple of companies that have a modern variant which could be viable but they are not cheap compared to alternatives.

The pension wrapper was far more tax efficient than the investment bond wrapper. So, taking it out of the pension to put it into a bond does not make sense from a tax point of view. Could you not have used less or perhaps used phased flexi-access drawdown instead?

I needed to take my pension as I had retired, that's not a problem.

But did you do it the right way?

The adviser was not independant so hence the caution.

Tied sales rep selling an obsolete product which is almost certainly unsuitable and a likely mis-sale.

ceewash

He underlined in the booklet he gave us "We guarantee that the unit price in this fund will not fall"

xylophone

He underlined in the booklet

Which booklet? The key facts summary like this?

http://www.wesleyan.co.uk/pdf/57151/Capital_Investment_Bond_WI_KFD-23

ceewash

It's a booklet called " How our with profits fund works"