Where can we get help to understand this?

dogsbestfriend

I'm going to stick my head above the parapet and risk ridicule because we simply have nowhere else to turn for advice

Since we both turned 55 we have been bombarded with offers to unlock our pensions, cash in, buy an annuity and have a free pension review. We found an independent financial advisor who produced a proposal and seemed very knowledgeable but the only products he offered were from St. James's Wealth Management. When we did more digging, we found that he was affiliated with them which seemed to defy the object of the exercise as surely an independent financial advisor should be able to choose from a broad spectrum of invesments

Fingers burnt we have just dipped our toe in the water again with another local independent advisor

We have received his proposal but I just want to make sure I have understood it correctly before responding

According to the questionnaires we both completed our attitude to risk is medium. He is proposing that we move our pension from Scottish Life to Old Mutual Wealth and here are the figures:-

End of Year Total Contributions Before Charges After Charges

1 £72648.61 £74,000 £70,200
2 £72648.61 £75,500 £70,000
3 £72648.61 £76,900 £69,700
4 £72648.61 £78,200 £69,500

I'm sorry the columns have all bunched up but I can't correct it

So the way I understand it, after 4 years of investment at mid-growth our pot of £72648.61 grows to £78,200 but after charges drops to £69,500. He has stated upfront that his charge will be £2179.45 so the missing amount of £6520.55 must be charges from Old Mutual?

Although I can see the figures in black and white I am struggling to understand why anyone would advise someone to make an investment where they will lose almost £9000. If we leave our money alone with Scottish Life it will keep on growing as it has done since inception

Have I understood these figures correctly?

Thanks for your time in reading this

xylophone

Since we both turned 55 we have been bombarded with offers to unlock our pensions, cash in, buy an annuity and have a free pension review.

http://www.thisismoney.co.uk/money/pensions/article-6056149/Heartless-pension-sharks-loot-91k-average-elderly-victims-say-watchdogs.html

He is proposing that we move our pension from Scottish Life to Old Mutual Wealth

Why?

It cannot be "our" pension - you mean both pensions?

And have you considered your overall financial position?

Have you both obtained State Pension statements?

https://www.gov.uk/check-state-pension

Would an appointment with Pension Wise for a discussion of your options help before you choose an adviser?

https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser

https://www.pensionwise.gov.uk/en/appointments

AnotherJoe

I suspect the issue is, advisers now have to give figures according to a set of standard projections. Whoever you invest with and with whatever mix of funds, they all have to use the same return projections. Making a mockery of the whole thing (except possibly to show up the effect of charges which you've noticed)

Also, no disrespect but this is a relatively modest amount (under £100k) for an IFA to manage, probably borderline, and their charges are disproportionately higher for smaller amounts. So it seems that the charges are outweighing the modest growth projections (which arent forecasts but just a number, eg "if it grew by 2% here's what the return would be" without any reason why it would grow by 2%)

In your position I'd suggest you do more reading, get more knowledge, and until you reach a point you are confident you've either got enough knowledge to go DIY, or choose an adviser you trust (you've done a bang up job noticing the SJP issue with a supposed "independent" adviser already), stay as you are. Check out the [STRIKE]Modevator[/STRIKE] Monevator website as a starter.

MallyGirl

Monevator would be better!

Take a look at the John Edwards books - DIY Simple Investing, DIY Pensions etc. Very good for the beginner (and free on Kindle unlimited if you have it)

kidmugsy

SJP are notorious for their high charges. It's hard to believe that the FA you spoke to was an IFA.

The second one you spoke to: why does he want you to leave Scottish Life?

Within your current pension, which funds are you invested in? Do you have good reason to change them?

At what age do you plan to stop working? What other income will you have at that point? (For example, has either of you got a Final Salary pension that will come into play?)

MK62

The £78200 vs £69500 figures are showing the cumulative effect of 4 years worth of charges on your pension.
So if you never paid any charges (not actually possible in practice), after 4 years at 2% growth (I suspect a bit of rounding to the nearest £100 has been done), your pension would be worth £78200, but in reality, after charges, it will only be worth £69500.

So it's a bit of an artificial comparison, in that there is nowhere you can actually invest with no charges - but it does show you the effect of the charges.

That said, the charges on the proposed pension are greater than the projected growth of 2%....around 2.2% if my quick bit of maths is correct......this is pretty high tbh, even if it does include all fund, adviser and wrapper/platform charges.
A typical SIPP would be in the region of 0.7-1.2% on average (though that does vary with platform and investment choices)......the cheapest SIPPs, on percentage fee platforms investing in passive index funds only, can be as low as c.0.35%, though there would likely be further charges on top of that (eg transaction and withdrawal charges).

For comparison, a SIPP at HL invested in something like Vanguard Life Strategy 60 (a forum favourite) would cost around 0.67% with no further charges.......HL are probably one of the better platforms for relatively inexperienced investors with pots under around £100k.

It would be interesting to know exactly what the OMW pension would be investing in, but I suppose you wouldn't be told that unless you committed.....

And after all that said , you'd need to compare anything you were considering moving to, with your existing Scottish Life (Royal London) pension....it may well be a decent option, and worth keeping.

BTW, there is nothing ridiculous about asking questions if you aren't sure of something, especially when it comes to your future finances.....the ridiculous thing would be to act even though you were unsure.....but some people still do it.

xylophone

https://www.royallondon.com/RL_Welcome/?referrer=slp

Have you checked on your existing pension?

Brynsam

Has your IFA provided a projection of how his plan compares to leaving your pensions where they are, with their current charging structure? It is entirely reasonable to ask the question why it would be a good idea to transfer if doing so will 'lose' you £9,000. A good IFA will take the time - and have the ability - to explain clearly and patiently what's going on and where the misunderstanding, if any, has arisen.

If he can't or won't, then find someone else who will. You are seeking expert help precisely because you don't know much about this topic, so don't feel embarrassed or worried about it.

sandsy

Effectively, this projection says that the combined effect of inflation and charges is likely to wipe out the growth you may make.

It looks like the assumed growth rate is about 4.4%pa, before inflation (of 2.5%).

Obviously, that is only an assumption. Rates will differ each and every year and the only thing that is certain is that the amount you get back will never match what is on a projection. But it does indicate that the charges over the first 4 years are going to be quite hard to recover so that your fund can still buy as much as it could today.

That's partly due to the 3% initial charge. 4 years is a short time horizon for investment - and a short time to recover that cost. If that 3% was spread over a much longer period, the figures would look a bit better. However, the ongoing charges also seem to be be around 2.2% a year which is also on the high side.

dogsbestfriend

Huge thanks to everyone who took the trouble to answer. I have been quietly and carefully digesting your replies which have impressed me with your range of knowledge.

It's easy to blame life for getting in the way of financial planning and for the past 10 years we have just kept plodding with 4 adult children still living at home plus 2 elderly parents with increasing needs. Filing the Annual Reviews sent by our pension providers was an easier option than facing it head-on unfortunately.

Both parents have now passed away and the last of our family moves out next month so this is the ideal time to take stock and take control of our finances.

I now feel that I have the headspace to get to grips with our pensions and will follow all the advice offered.

I have logged on to Royal London (Scottish Life) and am reading all the information there and have asked them for a 4 year projection so that I can compare like with like. Hopefully we will then have a better picture of the deal our IFA is offering. Now that I understand our options we can make more informed decisions.

Thanks for your kindness to a Money Saving Numpty Xxxx

dunstonh

We found an independent financial advisor who produced a proposal and seemed very knowledgeable but the only products he offered were from St. James's Wealth Management.

You were either lied to or misunderstood. SJP are tied sales reps of SJP. They are not IFAs. The I in IFA stands for independent. You know this as you used the full title. IFAs cannot be tied to any provider. They have to offer from the whole of market.

According to the questionnaires we both completed our attitude to risk is medium. He is proposing that we move our pension from Scottish Life to Old Mutual Wealth and here are the figures:-

Old Mutual is a provider that caters for IFAs but is also used by their own in-house FAs (using Instrinsic network). So, just make sure you are not repeating your mistake with SJP.

Research some years back found that over half the people that thought they were seeing an IFA were actually seeing an FA. So, make sure it is really an IFA and not an FA pretending to be one.

Be very aware that projections issued by providers have very low growth rates and the percentages used are before charges and usually factor inflation at 2.5% deduction. These can give very very low indications of growth. However, the figures are synthetic and need to read with an understanding of what they are saying. Too many people are reading those figure incorrectly.

I have logged on to Royal London (Scottish Life) and am reading all the information there and have asked them for a 4 year projection so that I can compare like with like. Hopefully we will then have a better picture of the deal our IFA is offering. Now that I understand our options we can make more informed decisions.

It is a mandatory requirement for an IFA to compare the charges on an existing plan with the new one and make you aware of them in their report, which is meant to be pre-issued to you.