Pension Uncertaincy

pitza

I am uncertain wether or not to up my pension contributions because of what happend to my endowments! Twenty five years ago I was told that my endowments would pay off my mortgage with a lump sum left over but I actually ended up with a shortfall! so as I have about 25 years till I retire how can I be confident that I will get my predicted pension? Twenty five years in financial terms is a long way ahead to predict as my endowments prooved !

dunstonh

I am uncertain wether or not to up my pension contributions because of what happend to my endowments!

There is no comparison unless you have an old pension with a closed insurance company.

how can I be confident that I will get my predicted pension?

Like any investment you keep an eye on it and adjust it when needed. I assume you dont drive a car that was made 25 years ago or wear clothes from 25 years ago so you should never assume an investment will go 25 years without needing changes.

Twenty five years in financial terms is a long way ahead to predict as my endowments prooved !

Actually, most people who went with endowments were actually better off with them being in shortfall compared to the economic cycle that existed before hand when they used to pay out 2-3 times what they needed. Increasingly, endowments have been heading back to surplus positions again as well. A lot of the problem with endowments were due in part to charges that suited boom/bust, high inflation economy and target growth rates which reflected that period. When we moved to the low inflation, steady economy, these old style products became obsolete. The concept of investment backed mortgages still survives and many people use modern products such as ISAs to do the same thing but cheaper and more flexible.

Modern pensions are just as flexible with investments. The days of going with xyz company and having just one investment fund are largely gone (a few exceptions still exist, such as the awful Virgin Stakeholder). All you need to do is keep your pension and the investments within it under review and make sure something better hasnt come along and the investments are what you want.

pitza

Thanks for your reply dunstonh, I have a few more questions:

To keep an eye on my pension investments I presume I need to contact an Adviser, my wife works for the inland revenue and is able to get free advice although its not independent , would this be ok?

Secondly I have two pensions, one with the C.I.S and one with Scottish Widows, which one would be best to pay more into and should I aim for about 10% of my gross pay? Thanks.

dunstonh

To keep an eye on my pension investments I presume I need to contact an Adviser, my wife works for the inland revenue and is able to get free advice although its not independent , would this be ok?

You dont need an adviser. Think of it like DIY. If you know what to do then you can DIY. If you dont know what to do then going DIY is still possible but you could do more damage. Therefore using an adviser makes more sense.

It has to be independent advice. Tied advisers represent the insurance company. Indeed, just in the last few weeks the FSA has suggested that it may not allow tied reps to use the term adviser in their title but something to reflect the fact that they are insurance salesmen. Another restriction of tied agents is that they cannot give advice on products from another company and more importantly most cannot portfolio plan. In other words, they cannot tell you to switch funds and cannot tell you the spread of funds that is best for you. This is why so many people who see tied reps end up in a default fund.

Secondly I have two pensions, one with the C.I.S and one with Scottish Widows, which one would be best to pay more into and should I aim for about 10% of my gross pay? Thanks.

Specific advice is against board rules and would breach FSA guidelines. So, consider the comments as discussion only. CIS pensions are largely rubbish although some of their earlier ones do have guarantees which can make them worthwhile. Although these have been sitting on zero bonus rate for some time and the guarantee may not be worthwhile if you have a longer time to go until retirement. Scot Widows have a number of different pensions over the years and were one of the last to offer guarantees (1995 is when they stopped). They also inherited the old LTSB plans and whilst they carry the Scot Wid logo, they are not real Scot Wid plans. Scot Wid have perfecly good modern pensions but some of the legacy pensions are not so good.

So, without knowing the facts about the pensions it isnt really possible to say which is best. Also, there would need to be some info known about you as that would change the advice as to whom best provider would be as things like length until retirement, investment risk and provision of ongoing advice would all impact on the decision on whom to use.

pitza

Ok, so I need to see an independent advisor, so how do I find one , what would the cost be and as a very rough guide what direction am I likely to be advised to go, ie. starting another pension or is it possible to transfer to another company without too much cost? Thanks for all your help dunstonh I appreciate it. cheers Pitza.

dunstonh

so how do I find one

www.unbiased.co.uk is the UK database of IFAs. Do a postcode search (dont filter by anything else at this stage is part of the filter are flawed. Especially qualifications where if you pick one qualification you will eliminate anyone that doesnt have that particular type. Even if they have a higher version).

Avoid the salesforces. You can normally spot these from the non local telephone number or a central address.

what would the cost be and as a very rough guide what direction am I likely to be advised to go, ie. starting another pension or is it possible to transfer to another company without too much cost? Thanks for all your help dunstonh I appreciate it. cheers Pitza.

If there are no guarantees on the old pensions I would expect a transfer to a modern alternative to be the recommendation based on legacy plans I have seen from both of these providers.

The cost can either be fee based or commission. fee can be better for larger cases but commission better for smaller cases. Increasingly advisers are working to "customer agreed remuneration" where you can agree a fee that is paid for out of the commission with anything above this being used to reduce product charges (it cannot be rebated with pensions as that breaks HMRC rules).