Know nothing about pensions - advice appreciated

[Deleted User]

Very cool when a person on the internet tells others to be wary of “people on the internet”. Still, its sound advice. One needs to be wary of random people. And of the self serving people from the financial industry. Be very wary of anyone saying “costs are not important, I’ll get you high returns”. Its a lie. 

Best source of information: books from reputable sources. Even if you do take paid advice, you need to invest a little extra time to understand and evaluate it. John Edwards’ guide to pensions is a good starting point.

ClaireLR

Thanks all.  I have an appointment with the IFA tomorrow to discuss.  

I'd like to put together a list of questions to put to him (I thought I'd already typed this response but it seems to have disappeared!).  

How much will it cost per month per person.
What does the IFA charge and what does the pension provider charge. 
Can I take a lump sum. If so is it a guaranteed amount. And at what age.  
Can we pay extra/less some months as our business gets busier (hopefully!) and in quieter months.  
How does the annuity work? Is that something I need to start saving for separately for now?

What else should I be asking, I'm sure there are lots of things but without knowing about them, I don't know! 

ClaireLR

Also need to check if I can transfer my current pension over, it's only a small pot (around £1k) but just seems to keep things in order probably.  

Albermarle

How does the annuity work? Is that something I need to start saving for separately for now?

An annuity works by you giving the insurance company/annuity provider, a pot of money and in exchange they guarantee you an income . Normally it is for life but you can also have fixed term annuities . Also it can be linked to inflation , or not . Each option has a different cost .

In the past people who built up a pension pot ( like you are starting to ) would buy an annuity with it when they retired . In fact there was not a lot of choice of different options.

Nowadays there is more flexibility and instead you can yourself take an income/lump sums directly from the pension pot. This is called drawdown. 

Although a minority prefer the absolute guarantee of the annuity, they are rather poor value for money and normally you can generate a better income via drawdown , without too much risk .

So you do not have to save separately for an annuity, you can choose ( or not ) to buy one with your pension pot .

Albermarle

ClaireLR said:

Also need to check if I can transfer my current pension over, it's only a small pot (around £1k) but just seems to keep things in order probably.  

That should not be an issue. 

[Deleted User]

I would ask for advisor’s credentials and experience. Their minimum qualification requirements are very low (a 4 month course focusing on how to sell services). Any areas of specialization?  How much experience does he have in dealing with self employed? How is he going to maximize your tax benefits? 

Describe what you need. Ask for pricing options and exactly what you get in each case. If you are planning to use ongoing advice, ask for a projection of future costs and their impacts.  Given you have nothing to start with, a one off transactional advice should be the way to go.  Get help to set up and ensure its simple to keep going. 

Ask what is his investment style and what type of investments he recommends. Ask on what basis he selects investments. 

Ask what platform he uses, costs, ease of access, can individual investors use the same platform?  

I wouldn’t worry about your annuity options until you are within 5 years from retiring. 

dunstonh

How much will it cost per month per person.

The monthly premium to the pension is what you decide.   

What does the IFA charge and what does the pension provider charge. 

As you are close to starting from zero, you pretty much want the IFA to do this on a transactional basis unless you are investing large amounts each year.  i.e. one off charge from the IFA.

Can I take a lump sum. If so is it a guaranteed amount. And at what age.  

You can but nothing it is guaranteed.   Unless you work in the public sector or a small number of private sector companies that have schemes similar to the public sector, you have to use pensions that are based on investments.    Investment returns are unknown.

Can we pay extra/less some months as our business gets busier (hopefully!) and in quieter months.  

If cashflow is an issue then it may be better to do ad-hoc lump sums once or twice a year rather than a regular.

How does the annuity work? Is that something I need to start saving for separately for now?

Ignore annuities. Most people don't buy one anymore and the options that exist when you get to retire will be different to now.

dunstonh

I would ask for advisor’s credentials and experience. Their minimum qualification requirements are very low (a 4 month course focusing on how to sell services).

Don't waste your time asking that.  Mordko is wrong and its irrelevant.

 Any areas of specialization?  How much experience does he have in dealing with self employed? How is he going to maximize your tax benefits? 

The OP is not self employed.   And why would they need any specialisation?

zagfles

Also worth a quick search for the IFA here: https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions 

just in case they've had judgements against them which may be a warning sign. I checked for someone and found they had about 9 judgements against them in a year!! Apparently the vast majority of firms have none.

Also worth researching if they (or their firm, address), traded under different names in the past.

zagfles

ClaireLR said:

Thanks all.  I have an appointment with the IFA tomorrow to discuss.  

I'd like to put together a list of questions to put to him (I thought I'd already typed this response but it seems to have disappeared!).  

How much will it cost per month per person.
What does the IFA charge and what does the pension provider charge. 
Can I take a lump sum. If so is it a guaranteed amount. And at what age.  
Can we pay extra/less some months as our business gets busier (hopefully!) and in quieter months.  
How does the annuity work? Is that something I need to start saving for separately for now?

What else should I be asking, I'm sure there are lots of things but without knowing about them, I don't know! 

Ask about any transfer out charges. Don't believe any verbal performance claims unless you get them in writing. In fact if the IFA tries to sell their services on market outperformance then it's a warning sign.