Buy Out Pension Taken in 1987 Are Insurance Companies to be trusted ? they win whatever they do ?
KAJTON
Posts: 4 Newbie
Hi, Am I alone in thinking that the insurance companies have been "robbing us again " .Having changed my job I was advised to transfer my pension in 1987 with a retirement date of 2020 , the insurance company gave me a forecast of a pot of £240K and a pension of £30K ,well the reality was £80K and £7.5K pension with for last 20 years only 0.5% added per year and no terminal bonus . The insurance company changed hands 3 times during the 30 years and made profits of over £1Billion . There is no transparency in how they arrived at their forecast nor the method of determining the annual bonus and it appears to be mis selling and then totally fraudulent in their method of giving bonus , the FCA so far have said they complied with the legislation at the time throughout but to me this is similar to endowment mortgages as at no time did the annual bonus get within 50% of the required to achieve their forecast in 1987 and that was only in the first year ! The system beating the masses again ?????????
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Yes they can be trusted, and generally they can be trusted to win, which is a good thing. We don't want more Equitable Lifes.
You mention a terminal bonus so did you have a With Profits policy? They are notoriously un-transparent.
There are strict rules for forecasts aimed at making company's offering comparable, rather than being accurate. I don't know when they came in though.
Interest rates were much higher in 1987 than they are today (over 8%) and the forecast/actual pension reflect that. There is no reason to suspect it was fraudulent just because it is lower.
Did you get a forecast in the lead up to your retirement?
Where you told that you did not need to take the pension they were offering, but could have looked around for better offers?
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Buy Out Pension Taken in 1987 Are Insurance Companies to be trusted ? they win whatever they do ?You have a contract with the insurer. The contract should be honoured apart from in areas where legislation changes prevent it.
There should be no winners or losers as the contract defines what can happen. Certainly, mistakes can be made and in rare cases different interpretations can occur that need outside help to resolve. However, in the vast majority of cases, things happen that are meant to happen.Am I alone in thinking that the insurance companies have been "robbing us again "Probably not but in the majority of cases where someone thinks that, it is a lack of understanding and knowledge that is the problem. Not the insurer.the insurance company gave me a forecast of a pot of £240K and a pension of £30KNo they didn't. They gave you a projection. Not a forecast. A forecast is a prediction of what could happen. A projection is synthetic calculation using a range of assumptions (that may or may not be reasonable).There is no transparency in how they arrived at their forecastyes there is. The assumptions are included with the projection. However, 1987 projections would have been based on 1980s data and actuarial assumptions. Since then, life expectancy has risen significantly and interest rates dropped to all time lows. Both things have crucified annuity rates. Also, inflation has been consistently below long term averages for most of that period resulting in lower gross investment returns (but broadly similar net investment returns).the FCA so far have said they complied with the legislation at the time throughoutI'm surprised the FCA have told you anything as they do not engage with consumers. They normally leave it to the FOS. However, they are almost certainly correct.but to me this is similar to endowment mortgages as at no time did the annual bonus get within 50% of the required to achieve their forecast in 1987 and that was only in the first year !There is a similarity to endowment mortgages but not in the way you have described. Historically, most endowment mortgages hit target and paid a surplus. Indeed, many of the remaining endowment policies still running are back in surplus positions again
The problem is economic events changed the global economy and the projections you had were based on a different era using assumptions that didn't pan out. In 1987, they did not predict globalisation, the dot.com growth and crash, the credit crunch or coronavirus. I am sure you didn't either. Yet all these things had profound changes on the rates of return and annuity rates.
your annual statements would have given you revisions using different assumptions more suitable for the period.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.1 -
KAJTON said:Hi, Am I alone in thinking that the insurance companies have been "robbing us again "0
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KAJTON said:Hi, Am I alone in thinking that the insurance companies have been "robbing us again " .KAJTON said:Having changed my job I was advised to transfer my pension in 1987KAJTON said:at no time did the annual bonus get within 50% of the required to achieve their forecast in 1987 and that was only in the first year !KAJTON said:the FCA so far have said they complied with the legislation at the time throughout
The system beating the masses again ?????????
Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
To all replies to date
You are correct it is FOS who I am in dialogue with . My advice came from my employer who owned an insurance company and did a market search . I could not at anytime transfer my pension elsewhere although I did review in 2015 . My self invested pension despite the changes in interest rates and the world events has done very well in growth . The insurance company declared £1billion in profits and changed owners 3 times and yet my "locked in " pension did not even match current low interest rates .This is my only pension that in my view has failed but has it or does the system just allow insurance companies to tell you anything that increases their profit . I won't debate the difference between forecast and and projection but when the figure changes the moment I sign up and I can't escape I feel abused by the industry0 -
My advice came from my employer who owned an insurance company and did a market searchAdvice is a regulated term that has a meaning when it comes to financial services. Although 1987 pre-dates that. Advisers did exist but not in the way you know them today. It was more of a brokerage style service back then.
Pre 1988 nearly anyone could have an agency with an insurer and place business through it. So, you probably didn't get advice but opinion of someone not qualified to give advice. Man down the pub style.. My self invested pension despite the changes in interest rates and the world events has done very well in growthAre they invested the same way?
With Profit funds started going obsolete in the late 90s through to early 2000s (A few gems carried on until mid 2000s but most were no longer used for new business after that). Following the dot.com crash, most with profit funds had to switch to very low risk investing as they needed to cover the liabilities as their primary objective. You generally find that the returns on most WP funds are consistent with returns on defensive/cautious level investments you would hold in a SIPP (if matching the same risk level). Many people with SIPPs, on the other hand, invest with much higher risk and the last decade has been very good for taking sensible risk. Although I doubt you were invested in a SIPP for the same period when the real issues hit (90s and early 2000s). Generally, SIPPs were only used by experienced and knowledgeable investors with large amounts back then.
The other issue, which we haven't covered, is that many S32 buy out bonds, have GMP and/or GARs. If there is GMP, then the value is often not in the fund value but the GMP. i.e. if there is a GMP that the fund is never going to meet then there is little point investing it at a different risk level as the insurer has to pay the GMP whether the fund value hits that or not.
If there are GARs then some of these can be double or more of current market rates. Again, the value to you is there and not in the fund value.This is my only pension that in my view has failed but has it or does the system just allow insurance companies to tell you anything that increases their profit .The insurance company would have made more from you had the value gone up more. Insurance companies sell products but it doesn't mean you have to buy them. As it stands, it is difficult to see what the insurance company has done wrong. It seems more that it is down to your lack of understanding and awareness.I won't debate the difference between forecast and and projection but when the figure changes the moment I sign up and I can't escape I feel abused by the industryPerhaps you should consider stopping your SIPP and investing altogether as it appears you have little or no understanding about investing. Or in life in general for that matter as things do not stay the same. It would be wholly inappropriate to continue using projection rates from the 80s when you know that the world has changed and they would no longer be suitable. Yet that is what you are suggesting they should do.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.1 -
Hi Dunstonh
I do not have SIPPS but have invested without a financial advisor since my experience above and you have reinforced my view that your industry make up the rules to suit and protect the industry , thanks for nothing0 -
KAJTON said:Hi Dunstonh
I do not have SIPPS but have invested without a financial advisor since my experience above and you have reinforced my view that your industry make up the rules to suit and protect the industry, thanks for nothingYou are welcome.
ignorance is bliss.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
KAJTON said:The insurance company declared £1billion in profits and changed owners 3 times and yet my "locked in " pension did not even match current low interest rates .0
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I could not at anytime transfer my pension elsewhere although I did review in 2015
Was this pension a S32 buyout bond with GMP?
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