IFA Pension advice

Linton

OK assuming that the £876 is not increasing with inflation over the next 5 years (which it may well be) and that the 5% annual increase is fixed rather than an inflation cap then a £39000 pot would run out of money after 25 years ie when you are 85. Which is just under your life expectancy assuming your are male of average health.

So should you be one of the 50% who lives longer than average you would win out with the DB pension.

If you were prepared to accept a level of risk and transfer and invest the £39000 instead you may expect to do a bit better and have some left over for your beneficiaries.

AlanP_2

bostonerimus wrote: »

Yes, some basics would probably be necessary given the lack of finance education in schools....don't get me started on that.

Given the standards of numeracy (and literacy) amongst the population of both the UK and the US I can't see any training course really solving the issue of not understanding what they are really giving up in exchange for the Pot of Gold and it's associated risks.

This is a bit out of date but indicative of the overall position.

http://www.dailymail.co.uk/news/article-2469032/US-numeracy-literacy-survey-finds-Americans-average-maths-English.html

As is this

https://www.jrf.org.uk/press/5-million-adults-lack-basic-literacy-and-numeracy-skills

bostonerimus

dunstonh wrote: »

IFA consultation would be personalised and lead to better outcomes. Time and again, it has been found that flow chart style advice leads to poorer outcomes and in a quarter of cases, the completely wrong outcome.

I won't argue that. People should be free to seek advice. I just have a problem with people being mandated to pay for advice.

The current system protects the 95%. What you propose would protect around 50%. No system can ever be perfect. You have to find balance and that means experienced investors and knowledgeable consumers may find it frustrating but they are in the minority. So, do you have a system that suits that minority or one that suits the majority?

When it comes to money people should be given the opportunity to choose the best option for themselves.

You appear to have a personal dislike of advisers (nor personally but at the profession as you are never rude in your discussion. It seems more of a dislike of the role). From what i have read of the US system, I can understand that. The UK used to be like the US and have significant numbers of reps like the US but it changed some years ago to remove those problems. It its height, the UK had over 200,000 advisers, agents, IFAs etc. Today it is just over 20,000. The difference is mainly the insurance agents/FAs tied to a provider. It isnt a sales environment any more, like it still is in the US.

IFAs should be available to help people if they are needed. It should be up to the individual to decide if they want or need advise.

You see advisers as a drag on returns. However, a provider in the UK that caters for both DIY investors and advised investors said a couple of years ago that their customers with advisers resulted in higher pensions than those without advisers. The main difference was due to better planning. So, yes, advisers are a cost but they can be a cost that prevents much bigger losses or shortfalls. You shouldnt be so negative towards UK advisers based on what the situation is in the US.

I feel that many individuasl can manage their own money successfully and that for those people IFAs do not provide a useful service and are a drag on performance. Of course some people need and/or desire advice from an IFA and that should be readily available.

Dasa

Linton wrote: »

OK assuming that the £876 is not increasing with inflation over the next 5 years (which it may well be) and that the 5% annual increase is fixed rather than an inflation cap then a £39000 pot would run out of money after 25 years ie when you are 85. Which is just under your life expectancy assuming your are male of average health.

So should you be one of the 50% who lives longer than average you would win out with the DB pension.

If you were prepared to accept a level of risk and transfer and invest the £39000 instead you may expect to do a bit better and have some left over for your beneficiaries.

My mum died at 73 and my dad at 75 so doubt I will make it to 85! I will not be retiring for some time yet and when I do I will have enough to live on.

So I was thinking of transferring it to a scheme where I could take lump sums and pay off my mortgage over the next few years.

Linton

bostonerimus wrote: »

I feel that many individuasl can manage their own money successfully and that for those people IFAs do not provide a useful service and are a drag on performance. Of course some people need and/or desire advice from an IFA and that should be readily available.

Many can but far far more have never managed any large sums of money in their lives perhaps largely living from one pay day to the next and know absolutely nothing about investing beyond knowing that they dont want to take any risks. Given that the government has decided that access to large DB pots should be permitted for all how do you protect the majority?

You could I guess require people to take an exam to see if they have the necessary understanding and experience and require that those who fail take the course. Good idea?

On balance I think I would support the US policy and simply ban transfering DB pensions of a life changing size. The nanny state does have some benefits.

The numbers transferring their DB pensions must be pretty small and so the overhead of adopting your proposals would be very high. Perhaps comparable with requiring the individuals to get personalised regulated advice. Surely this is better rather than leaving them at the mercy of the unregulated cold caller who would be more than happy to oblige.

LHW99

I doubt whether most people even understand compound interest

From experience, many are fairly shaky on the calculation / meaning of percentages, so compound interest is a doubly losing wicket

bostonerimus

Linton wrote: »

Many can but far far more have never managed any large sums of money in their lives perhaps largely living from one pay day to the next and know absolutely nothing about investing beyond knowing that they dont want to take any risks. Given that the government has decided that access to large DB pots should be permitted for all how do you protect the majority?

I don't see it as the Government's function to bet involved in personal financial decisions beyond actual fraud protections.

On balance I think I would support the US policy and simply ban transfering DB pensions of a life changing size. The nanny state does have some benefits.

I agree, transferring out undermines the very concept of the DB pension contract.

cloud_dog

bostonerimus wrote: »

IFAs should be available to help people if they are needed. It should be up to the individual to decide if they want or need advise

....And, if 'they' don't know or understand what questions to ask or how to phrase the questions accurately how can they judge, appropriately, if they require help?

Whilst I'm all for less big brother Government, on this one I will side with mandating obtaining financial advise. Holistically the UK has a more social inclusive approach to ensuring its citizens are financially able to survive. With this in mind I am more than happy for said Government to ensure people are 'forced' to ensure they have a full understanding of the consequences of their actions so as to help us (the state) from having to bail them out.

bostonerimus

cloud_dog wrote: »

....And, if 'they' don't know or understand what questions to ask or how to phrase the questions accurately how can they judge, appropriately, if they require help?

Whilst I'm all for less big brother Government, on this one I will side with mandating obtaining financial advise. Holistically the UK has a more social inclusive approach to ensuring its citizens are financially able to survive. With this in mind I am more than happy for said Government to ensure people are 'forced' to ensure they have a full understanding of the consequences of their actions so as to help us (the state) from having to bail them out.

If the advice is mandated then it should be reasonably priced and paid for by the Government. The thread started with an estimate of between 3% and 13% for the IFA required advice to access an pot just over 30k....that's outrageous IMHO.

bostonerimus

Dasa wrote: »

My mum died at 73 and my dad at 75 so doubt I will make it to 85! I will not be retiring for some time yet and when I do I will have enough to live on.

So I was thinking of transferring it to a scheme where I could take lump sums and pay off my mortgage over the next few years.

Absent any definite medical or genetic knowledge your parents' life spans might have no correlation with your own. So I would plan for at least 5 years longer than your statistical life expectancy. Doing less could see you making withdrawals that are too large and depleting your pension pot too quickly.