Pension Product Mis-Selling?

leosayer

dunstonh said:

I do not want to purchase annuity and never did. 

So, this money in the pension was only put in there after 2015?  (as before then, would have needed to buy an annuity)

My financial advisor was fully aware of this.  I recognise all that you say in your informed opinion - I expected the financial advisor whom I paid to walk me through this to make such issues and considerations clear.

Advisers will model scenarios that include losses of x% in the early years.  And the scale of losses in 2022 are high for gilts but you are unlikely to be 100% in gilts if you are using drawdown unless it happens to be that the yield is sufficient to cover your income need.  In which case, the unit price (value) is largely irrelevent.

If your adviser told you that your drawdown rate was sustainable when you started then it should still be so as the modelling advisers use takes into account negative periods happening at the start.      If the adviser said it wasn't sustainable or you were pushing limits  (such as giving you a success rate of 63% or requiring better than average returns - or worse) then you would know that the risk of running out of money was a 

Drawdown comes with risk warnings that appear on your adviser documentation, the pension provider documentation and the fund house documentation.    The most common one is that the value of your investments can go down as well as up.      Key risk warnings are normally discussed and a periodic like 2022, whilst unpleasant, is still not that large for investments.      The sustainability of your income draw relative to your investment value is normally discussed.

For a mixed asset portfolio, the loss is similar to that seen in 2020.  Not much more than 2018 or 2015/16 and less than that seen in 2008 and 2000-2002.       If you have been invested for some time, then you will almost certainly seen similar or larger falls.

However, the bottom line is that if you do not accept the risk of using drawdown then you should use annuity.    You don't want to use annuity. So, that means you need to accept the risks of drawdown.

The paragraph I highlighted in bold is the key point for me - I assume its missing the word "possibility" at the end.

Seeing value drops can be traumatising but they're an unavoidable feature of creating a sustainable drawdown plan that has to last for years maybe decades into the future. Such a plan can't involve keep money under the mattress or trying to predict when markets will rise or fall.

I suggest you outline your concerns to your advisor if you haven't already.

Albermarle

I'll close my part of the post here as I feel this site is manned by hawkish IFAs and like and rather hoped it was more focused as a consumer champion site.

There is only one IFA posting regularly, your other replies are from mainly DIY investors. We understand your worry/disappointment, especially as we hear the same story from new posters on a daily basis. However the reality is that investing can bring ups and downs, and the downs hurt more than the ups bring joy.

Best to just to try and look at the long term picture . Over the last 10 years nearly all investors will still be well ahead.

Pat38493

dunstonh said:

If your adviser told you that your drawdown rate was sustainable when you started then it should still be so as the modelling advisers use takes into account negative periods happening at the start.      If the adviser said it wasn't sustainable or you were pushing limits  (such as giving you a success rate of 63% or requiring better than average returns - or worse) 

As a matter of interest, do IFA's generally recommend a certain % success rate in the modelling to their clients as the minimum or do they ask the client what success rate they are happy with?  I can imagine that you need to increase your fund quite a bit for example to go from 97% to 100% success rate in those software models.

dunstonh

As a matter of interest, do IFA's generally recommend a certain % success rate in the modelling to their clients as the minimum or do they ask the client what success rate they are happy with?

The reality is that different people will have different views and I suspect the level of risk warnings given by advisers is ramped up with people who are deemed to be taking too much from their pension.    Ultimately, the client can largely do what they want.  The adviser can only advise and warn.      I tend to increase my bluntness in my warnings the greater the draw and follow it with plain blunt speak in the written report with bold type or red text when the risks are higher than someone with a more sustainable draw.      A style that has worked several times and managed to get people to change their mind.

In my experience, some people tend to gloss over risk warnings as something that won't happen to them and tend not to be able to tell the difference between the generic regular warnings and the higher risk warnings that may be specific to them based on what they want to do.    Changing the tone and the use of bold text and red text has worked for me.   Every adviser will have their own ways.

xylophone

Have you checked your state pension forecast?

Is the SIPP your only other provision or do you have an occupational pension to come?

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