MetLife Secure Capital Option - Your thoughts

cambb

hi,
I'm meeting up with my IFA to go through my DB transfer and he has mentioned a couple of pension products for me to do a little research on before the 1-2-1.

I've read up a little on the MetLife Secure Capital Option and would like peoples thoughts on the product. I'll be transferring approx £525K and i'm currently 48 looking for retirement in 10 years time. The other product he mentioned is the prufund growth fund.

Thanks in advance

dunstonh

I've read up a little on the MetLife Secure Capital Option and would like peoples thoughts on the product.

Personally would not use it. I have a distrust and dislike of these types of products. The "secure" bit costs money. So, you are looking at a more expensive option. The investment options are not typically great and the charges are met by selling units. The secure bit is against the units.

American life companies have a woeful track record trying to promote these third way products in the UK. Most have pulled out but Met life are still here.

I see these products as being used when an IFA has failed to do their job properly by explaining how investments work or if you are the type of person that is not listening/understanding about how investments work. They are an easy play rather than a sensible play. For someone that is hooked on the word "secure" without understanding the consequences of that security and whether it is actually worth it or not.

Product charge is tiered from 0.4% to 0.7%. p.a.
Guarantee charge is based on term and based on your time around 0.65% pa.
Fund charges are in-house and range from 0.22% to 1.06%
Adviser charges on top.

With your fund value, that is paying around 1.2% a year more to get that security. Most 20% crashes recover within 90 days. Every decade or so there is one that may take 12-18 months. Your timescale of investing is going to be much longer than 10 years. It may be 10 years before you start drawing income but the pension will be invested for another 25-30-40 years. Just think how that 1.2% extra charge a year is going to impact over that period.

Why are you scared of investment risk? you have a decent pot size and a structured portfolio built to match your risk profile would be used by most. So, what is it that is putting you off the mainstream/conventional cheaper options?

coyrls

As described by dunstonh, I'd be surprised if such a policy could match the benefits of your existing DB scheme. If you want to minimise risk, you should probably stay with your DB scheme.

cambb

dunstonh wrote: »

Personally would not use it. I have a distrust and dislike of these types of products. The "secure" bit costs money. So, you are looking at a more expensive option. The investment options are not typically great and the charges are met by selling units. The secure bit is against the units.

American life companies have a woeful track record trying to promote these third way products in the UK. Most have pulled out but Met life are still here.

I see these products as being used when an IFA has failed to do their job properly by explaining how investments work or if you are the type of person that is not listening/understanding about how investments work. They are an easy play rather than a sensible play. For someone that is hooked on the word "secure" without understanding the consequences of that security and whether it is actually worth it or not.

Product charge is tiered from 0.4% to 0.7%. p.a.
Guarantee charge is based on term and based on your time around 0.65% pa.
Fund charges are in-house and range from 0.22% to 1.06%
Adviser charges on top.

With your fund value, that is paying around 1.2% a year more to get that security. Most 20% crashes recover within 90 days. Every decade or so there is one that may take 12-18 months. Your timescale of investing is going to be much longer than 10 years. It may be 10 years before you start drawing income but the pension will be invested for another 25-30-40 years. Just think how that 1.2% extra charge a year is going to impact over that period.

Why are you scared of investment risk? you have a decent pot size and a structured portfolio built to match your risk profile would be used by most. So, what is it that is putting you off the mainstream/conventional cheaper options?

Thanks for the excellent reply.

He has mentioned the Pru Growth Fund as one plan to look into. What other mainstream/conventional cheaper options could i look into too?

Linton

I rather like the prufunds. They do what they do year after year, with little concern about the ups and downs of the stock market. Not suitable if you are after major gains but just right for the seriously risk averse.

westv

Is there much point in transferring from a safe and secure product to an almost safe and secure product?

bigadaj

cambb wrote: »

hi,
I'm meeting up with my IFA to go through my DB transfer and he has mentioned a couple of pension products for me to do a little research on before the 1-2-1.

I've read up a little on the MetLife Secure Capital Option and would like peoples thoughts on the product. I'll be transferring approx £525K and i'm currently 48 looking for retirement in 10 years time. The other product he mentioned is the prufund growth fund.

Thanks in advance

What is the current benefit on your scheme, and how does that compare with the options that your ifa is currently suggesting?

sandsy

Why are you looking to transfer out of the DB scheme?
And what rationale is there for considering the Metlfe product - how does it give you what you are looking for, over and above any other product?

For the cost of that product and what it offers, I'd have to question if it's right for you to leave the DB scheme at all.

cambb

Hi,

It was just one product that was mentioned hence a bit of research.

The reasoning behind leaving is the ability for my wife/children to pass the money onto them "if" something happens to me. My father died 3 weeks ago aged 74 from prostate cancer and while im clear I wouldn't like my family to be in the position my mother is ie 50% spouse pension. Also I plan to retire earlier if possible. I've also got a second pension that approx £1k a month is invested in a fidelity scheme. I have about 80k at the moment. Also my wife currently has a DB scheme worth approx 8k a year at 58.

My figures are below ref how much my DB scheme is worth:-

Age 55 Gross Retirement Pension
£12,288.60 Per Annum

Age 58 Gross Retirement Pension
£13,809.24 Per Annum

Age 65 Gross Retirement Pension
£19,016.28 Per Annum

I think i'll lean more towards the Pru growth fund but have the meeting on Friday to discuss all of my options.

Anything i should ask or research beforehand?

Linton

Before making a decision I suggest you do some what-if calculations on inflation. Is the DB pension capped? You wouldnt expect the Prufund to increase in value with serious inflation except perhaps over the very long term. Bearing in mind that some of your drawdown funds wont be accessed for perhaps 30-40 years putting 100% of your investment in something like the prufund seems over cautious to me. It is reasonable to expect higher risk investments to provide better inflation protection.

For a male aged 48 today the average life expectancy is expected to be around 89. The chance of dying by 74 is roughly the same as living to 99. Neither are insignificant. You do need to cover both ends of the longevity spectrum.

cambb

Thanks Linton.

I presume I could say request 50% into Prufund and say 50% into a higher risk investment?

My Fidelity pension is currently invested in the Medium Term growth Fund and that seems to provide a middle of the road investment.