Financial Advisor Help Needed

Sarah_Kayte

My Mum and Dad are on a moderately low income and have no savings. My Dad has a pot of around £40k in a pension, which stubbornly he didn't pay to have managed after it matured. It has now lost several thousand pounds and they have asked me for help as to what to do. I have absolutely no idea about pensions and said I would try and find a recommended financial advisor to help them. They live in Chester. Can any one point me in the right direction?

Many Thanks

molerat

You are unlikely to find an advisor who will be interested in advising on or managing a £40K pot.

[Deleted User]

I don’t know the answer but just an FYI… Advisor run pensions also lost.  And because the pot is small, the cost of paid advice is unlikely to be affordable. If you provide more details on their circumstances and what the funds are in now, you will probably get a few suggestions here.

tacpot12

It probably is being managed, but perhaps not in the way you expect. Can you tell us who the pension is held by and what investments are in the pension? 

All investments have lost money this year. My own pension lost about £60,000, but has recovered some of this. Investments go up and down. It doesn't really matter if you still have a long time to live. Are you expecting your Dad to die in the next 5 to 7 years? 

Albermarle

Probably the pension went up significantly in the last decade. Now it has dropped off this year. Same for everybody.
If you supply details, you should get some informed comment.

xylophone

Are Mum and Dad still under State Pension Age?

If so, have they each checked on their state pension situation?

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

Are they both still employed?

If so, do they each have a workplace pension?

Are they in receipt of any means tested benefits?

Assuming Dad's "matured" pension is a standard DC arrangement and he is over age 55, he can get some guidance on how he can access his pension through Pension Wise.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

dunstonh

It has now lost several thousand pounds and they have asked me for help as to what to do. 

Why do anything?
On average, one in five years will be a negative year.   A negative year doesn't mean you need to change anything.  There may be some tweaking here and there and a reason to check its still suitable but when you know you are going to suffer a negative year approx one every 5 years, you shouldn't worry about it when that negative year comes along.

2020 had a bigger loss but recovered before year end.
2018 was a negative year
2015/16 had a similar negative period 
2008 had a bigger loss
2000-2002 had three negative years in a row.

bostonerimus

Most pensions invested in the stock and bond markets are down this year by maybe 15%, some even more. So your Dad might be doing ok - relatively speaking. Inaction is not necessarily a bad management strategy. Also for 40k an advisor probably won't want to take it on and if they did the fees would further reduce the size of you Dad's pension pot without any guarantee of making enough gains to pay for them.

Ibrahim5

Getting a financial advisor involved is the best way to lose a few more thousand pounds.

gm0

As others have variously observed.  This is a mix of expectations about short and long term markets. Financial knowledge, UK pension complexity.  In former times with annuity compulsion this particular issue would not have come up (though other problems related to one off purchase timing and available rates did). In those days the saved pension being converted to a retirement income until death and that was that as far as markets and ups and downs are concerned.

Modern individual DC pension drawdown rather than annuitisation is fine for people with the time and knowledge around investment. And fine for those with a pot of a size to buy advice cost effectively to do the work for them if they don't care to know.  Advice doesn't change the fact that short term gains and losses will continue - sometimes to the 40-60%+ level.  So worse than 2022.

Individual DC drawdown is absolutely *not fine* for a range of people like OP's family who fall between these gaps.  And get spooked by what happens to what they view as savings.  Not unusual to be underprepared to deal with this.  Few are outside people who worked in the industry.

The FCA are well aware of this consumer advice gap and are scrabbling somewhat fruitlessly for ways to address it. 

Investment pathways (Simple options offered by the life companies and pension product providers) and pushing the Pension Wise guidance service telephone calls being two examples of recent initiatives aimed at this group.  Give Pension Wise a try.

One of the other concerns the FCA have is "too much cash" precisely because people get spooked by short term market returns but are less sensitive to inflation.  Loss aversion and recency bias is baked into the monkey brain.

The advice gap remains wide and unaddressed based on the statistics on pot sizes from ONS. 

It's a *really* difficult thing to fix starting from here so it ends up in the long grass beyond the initiatives described above.

dunstonh

The advice gap remains wide and unaddressed based on the statistics on pot sizes from ONS. 

Abolishing the MiFIDII requirement of "at least annually" would fix a lot of that.  It would allow advisers to take on smaller value clients with less frequent needs.  Maybe setting it to a minimum of every 2 or 3 years.