Final Salary Pension Transfers Mis-Selling Scandal No. 2?

GDB2222

https://uk.yahoo.com/finance/news/apos-swap-pension-1m-apos-063732409.html

I won't quote the whole thing, but :

"The City watchdog, the Financial Conduct Authority, has intervened and blocked over 50 advice firms from performing pension transfers.

A spokesman for the FCA would not say what the firms had done wrong, but pension experts say today’s environment is reminiscent of the pension mis-selling scandal of the Eighties and Nineties when millions were wrongly advised to opt out of generous workplace pensions.

Billions of pounds of compensation were paid out as a result.

Tom McPhail, of Hargreaves Lansdown, the pension and investment firm, said: “There is a lot of inappropriate advice being given. Some investors will lose their money, and I expect the regulator to come down hard. We’ve seen this before.”"

dunstonh

It's funny because you see plenty of posts on this board moaning about advisers being cautious and not recommending transfers out yet you get articles like that in the media predicting a scandal. It should also be noted that the article contains a number of errors.

I think the important thing is that you should approach the advice firm of your choosing and never employ one that has contacted you. If the advice is to use unregulated investments and goes off the mainstream then be on guard (i.e. dont do it). Finally, if you are the type of person that is going to panic when their final salary transfer value of say £500,000 drops to £400,000 then you need to be thinking whether it is the right thing for you or not. A drop from £500k to £400k will likely happen at some point (possibly more). The more you have, the more the volatility will be noticeable with very high amounts lost. Equally, it does mean the more it goes up too during growth periods but some people find it hard to average out the ups and downs and will panic on the downs.

robin61

dunstonh wrote: »

The more you have, the more the volatility will be noticeable with very high amounts lost. Equally, it does mean the more it goes up too during growth periods but some people find it hard to average out the ups and downs and will panic on the downs.

I can really relate to this. I have been investing in a DC scheme and my Wife also has a DC scheme. Really the only thing that allows me to feel comfortable about these investments is that i also have a DB scheme which will be enough to get by on should other investments go pear shaped. This allows me to be braver than i would otherwise be with other investments.

RickyB2000

robin61 wrote: »

I can really relate to this. I have been investing in a DC scheme and my Wife also has a DC scheme. Really the only thing that allows me to feel comfortable about these investments is that i also have a DB scheme which will be enough to get by on should other investments go pear shaped. This allows me to be braver than i would otherwise be with other investments.

Of course many people will know nothing other than a DC scheme going forward. I suggest everyone does a stint in the public sector just to get some diversification with a DB scheme (or get very well paying jobs).

ischofie1

robin61 wrote: »

I can really relate to this. I have been investing in a DC scheme and my Wife also has a DC scheme. Really the only thing that allows me to feel comfortable about these investments is that i also have a DB scheme which will be enough to get by on should other investments go pear shaped. This allows me to be braver than i would otherwise be with other investments.

I think I fall into the same boat in that my DB allows me to stay quite high on the risk scale for my DC.
I also think it's wise to have contingency plans.
My DC is on target to let me finish at 55 in 5 years time. If it's not there at 55 I'll carry on working.
I also intend to hold 3 years worth of cash at 55 and draw on this in a downturn but top up in an upturn.
This should allow me to stay reasonably up on the risk scale during retirement.
It helps that by nature I don't panic during a downturn.

Other than that... everything else is in the lap of the gods. :A

marco_79

I'm in the considering coming out of a DB due to the multiplier being so high (x37-x39 £800k min, age 37). I'm also very nervous about having nothing to fall back on. The growth rate I would like is only about 3-4% so can afford to go low risk. Going to take the advice of several IFAs that I will approach before making any decisions. Half of me is saying leave well alone other half doesn't want to miss out on the opportunity of a life time.

RickyB2000

marco_79 wrote: »

I'm in the considering coming out of a DB due to the multiplier being so high (x37-x39 £800k min, age 37). I'm also very nervous about having nothing to fall back on. The growth rate I would like is only about 3-4% so can afford to go low risk. Going to take the advice of several IFAs that I will approach before making any decisions. Half of me is saying leave well alone other half doesn't want to miss out on the opportunity of a life time.

Based on this you should probably just take it, spend the money and then claim the compensation for miss selling. You will be kicking yourself when you are claiming your measly DB pension while everyone else is living it up on their miss-selling compensation!
Obviously this is not advice.

GSP

Hi dunstonh,
Drawn to your post about the value likely to drop 25% or more and being able to absorb, and having the character not to panic.
Are these falls you have seen in the more riskier higher return higher loss investments?
When I start mine off was looking to be in the middle range of investments. Can the fall you have mentioned be seen here as well over time.
Thanks

davieg11

GSP wrote: »

Hi dunstonh,
Drawn to your post about the value likely to drop 25% or more and being able to absorb, and having the character not to panic.
Are these falls you have seen in the more riskier higher return higher loss investments?
When I start mine off was looking to be in the middle range of investments. Can the fall you have mentioned be seen here as well over time.
Thanks

Read post number 33 about drops
https://forums.moneysavingexpert.com/discussion/5632529

GSP

Thanks davieg,
If reading right, the relatively safer investments can fall by 10-20% gilts, government and corporate bonds.

Saw an illustration not on here but suggested middle range risk investments move from anything from 5% loss to 10% gain and was used to see my risk appetite.

GDB2222

GSP wrote: »

Hi dunstonh,
Drawn to your post about the value likely to drop 25% or more and being able to absorb, and having the character not to panic.
Are these falls you have seen in the more riskier higher return higher loss investments?
When I start mine off was looking to be in the middle range of investments. Can the fall you have mentioned be seen here as well over time.
Thanks

In terms of risk, bear in mind that investors who got into Japanese shares at the peak of the index (40 years ago) saw a 70% drop very quickly, and the index has never recovered. It's still hovering about half of its peak level.

I'm not saying that is what will happen to UK shares, but it's an indication of what can happen. The Japanese market was vastly overvalued at the time, but it's easy to see that with hindsight and people were still investing new money at the peak.

The uk market isn't so overvalued, but bear in mind the PE ratio on the FTSE is currently 30, with a dividend yield of 3% and dividend cover of 1. That's partly justified by last year's losses in the mining sector being included in the earnings part of the PE ratio, but it's still a challenging rating.