Pension illustration

luapreniart

In 1985 when I was 26 I started a personal pension with TSB, later taken over by Lloyds  bank and then Scottish Widows. I have paid contributions every month since.

At the time of doing the paperwok the agent did a written illustration, two figures  based on 9% and 12 % growth, the pot would be worth totals of £191,678 or £430,508 respectively.

Today, 2 months until the pension matures, the pot is worth approximately £85,000, well below the above figures.

I fully understand that the pension has not grown at 9 or 12%, but given the 'too good to be true' figures above I have made a complaint to Scottish Widows.

I feel that showing a young person the above illustrations is a very big financial enticement to take out the pension and is, at least, a large element of mis-selling.

I have contacted the Financial Ombusman who will help if needed, but I am not sure what would be a fair amount of financil compensation. Any thoughts?

Does anyone have any experience with this issue?

dunstonh

At the time of doing the paperwok the agent did a written illustration, two figures  based on 9% and 12 % growth, the pot would be worth totals of £191,678 or £430,508 respectively.
Today, 2 months until the pension matures, the pot is worth approximately £85,000, well below the above figures.

The figures you were initially quoted did not include reductions for inflation.   Did you increase your contributions each year to maintain a real terms value?

I fully understand that the pension has not grown at 9 or 12%, but given the 'too good to be true' figures above I have made a complaint to Scottish Widows.SW are not responsible for investment returns, inflation, your contribution levels or the projection rates used in illustrations (these are set by the regulator).

I feel that showing a young person the above illustrations is a very big financial enticement to take out the pension and is, at least, a large element of mis-selling.

The illustration figures you were given reflected the historic growth rates of that period and were gross of inflation.    Not long after taking yours out, UK inflation went through a long period of historic lows and projections were lowered to reflect that.

I have contacted the Financial Ombusman who will help if needed, but I am not sure what would be a fair amount of financil compensation. Any thoughts?Zero would be a fair amount.   
a) there is no wrong doing 
b) the provider does not select the illustration values.  It is mandated on them
c) you receive at least an annual statement with projections included and the projection rates have varied over that period to reflect changes in the global economy.   You seem to be ignoring those.
d) the illustration would also say it is not guaranteed and you could get back more or less than this.  You seem to be ignoring that.

<br>Does anyone have any experience with this issue?

yes. 


edit: (sorry about formatting - the quote function broke again)

Runner_Duck

That sounds about the same as my experience.  Can't remember the exact date but when Gordon Brown was chancellor I seem to recall he removed a tax break from pensions which had a disastrous impact.  Then Liz Truss's 40 day reign ruined the bond market which wiped another 25% off my DC pot virtually overnight. To be fair to my provider I've known for years it was not going to be anywhere near their original estimates so adjusted my plans.

dunstonh

Can't remember the exact date but when Gordon Brown was chancellor I seem to recall he removed a tax break from pensions which had a disastrous impact.

That had very little impact on DC pension returns.

 Then Liz Truss's 40 day reign ruined the bond market which wiped another 25% off my DC pot virtually overnight.

Gilts had already fallen significantly before she was in power and continued to do so up to a year after she left power.   Her budget didn't change the direction.  It just amplified it for a short period.

To be fair to my provider I've known for years it was not going to be anywhere near their original estimates so adjusted my plans.

They are not estimates.  They are synthetic projections using a range of assumptions.     

There is some irony that the FCA has criticised some advisers for using straight line projections for advice and considers them unsuitable.    Yet it continues with the straight line projection rules for projections from providers.

tacpot12

I think, sadly, that the Financial Ombudsman will conclude that you were not missold the pension. It has underperformed, but this should have been apparent over the life of the pension. Whose job was it to select the portfolio and monitor its growth? I suspect the Financial Ombudsmand will conclude that answer was that it was your job and you failed to do so.

The projections are just that; projections based on an assumption of a average return. I doubt you will be able to prove that you were guaranteed any level of return at all. I know I wasn't when I took out my private pension in 1990.

LHW99

You'd possibly have been in a worse position if you hadn't been pushed to start it

Brie

Did joining the private pension mean you left an occupational scheme or prevented you from joining one?  If that was the case you may have a case to have your situation reviewed.  There was a big push to get people into PPs in the 80s but you couldn't be in a PP and a work pension so many people were convinced to leave.  You might want to think back to that time and possibly get the pension company to review your situation for compensation.

Albermarle

Runner_Duck said:

That sounds about the same as my experience.  Can't remember the exact date but when Gordon Brown was chancellor I seem to recall he removed a tax break from pensions which had a disastrous impact.  Then Liz Truss's 40 day reign ruined the bond market which wiped another 25% off my DC pot virtually overnight. To be fair to my provider I've known for years it was not going to be anywhere near their original estimates so adjusted my plans.

If you had been invested in a typical pension fund from when GB was chancellor to today, you would have seen some ups and downs, but at least a reasonable average annual growth.

The providers did used to be overoptimistic, but now they have swung the other way. Plus they now quote in todays money by reducing the investment growth by an estimate for inflation.
We regularly have posters saying is it worth having a pension when the projections are so low. So full circle.

MEM62

luapreniart said:

In 1985 when I was 26 I started a personal pension with TSB, later taken over by Lloyds  bank and then Scottish Widows. I have paid contributions every month since.

That was a wise move.  

luapreniart said:

At the time of doing the paperwok the agent did a written illustration, two figures  based on 9% and 12 % growth, the pot would be worth totals of £191,678 or £430,508 respectively.

Today, 2 months until the pension matures, the pot is worth approximately £85,000, well below the above figures.

The projections were probably reasonable at the time.  Also, you would have had a statement sent to you every year since letting you know how your pension was doing.  Have you ignored all these until now?

luapreniart said:

I fully understand that the pension has not grown at 9 or 12%, but given the 'too good to be true' figures above I have made a complaint to Scottish Widows.

What is the basis for your complaint?  Based on your post I cannot see a reason for one.  

luapreniart said:

I have contacted the Financial Ombusman who will help if needed, but I am not sure what would be a fair amount of financil compensation. Any thoughts?

I do not believe that they will have any cause to act in this case.