What is the right Pension Fund?

Hope-peace

Hi

I am new to investment and I have been contributing to individual pension fund with Clerical Medical. My monthly contribution ranges from £1000 to £2000 depending on how much money I make monthly as a consultant.
What concerns me is that my statement from Clerical Medical in December 07 shows my total fund value to be reduced- eating deep into my capital which means if I was to take it today I will actually loose some of my capital.

A friend as advised me to play save by putting the money in a cash only pension fund with guaranteed growth of 5% yearly and no risk of loosing my capital with less returns compared to stock managed pension fund.

I am already putting money away on stocks 'index tracker fund -ftse100 &250' which I understand the risk of likely loosing my capital. So I don't want to also run the risk of loosing my pension capital in future.

I don't know if to do as my friend advises with no risk of losing my capital but with less return when I’m 55yrs or transfer to another pension provider? I need help. Please any advice will be greatly appreciated.

Thank you

dunstonh

Your poll makes no sense so I am not answering that one.

What concerns me is that my statement from Clerical Medical in December 07 shows my total fund value to be reduced- eating deep into my capital which means if I was to take it today I will actually loose some of my capital.

Not a surprise considering how the various asset classes performed during 2007.

A friend as advised me to play save by putting the money in a cash only pension fund with guaranteed growth of 5% yearly and no risk of loosing my capital with less returns compared to stock managed pension fund.

And your friend is authorised and regulated to give you that advice? If not, is he aware he has broken the law? Does your friend not realise that 5% returns are lower than what you would expect on balanced portfolio. Ideally double digit returns are what you are looking for over the long run.

I am already putting money away on stocks 'index tracker fund -ftse100 &250' which I understand the risk of likely loosing my capital. So I don't want to also run the risk of loosing my pension capital in future.

Why are you going medium/high risk on these but then looking to low risk on the pension? What about the bits in between? Where is the diversification?

I don't know if to do as my friend advises with no risk of losing my capital but with less return when I’m 55yrs or transfer to another pension provider? I need help. Please any advice will be greatly appreciated.

Clerical Medical are provider that offers a good range of low risk internal funds coupled with some of the main external funds. You wouldnt use them as a medium/high risk (or higher) investor as they dont have the range of funds to give you the portfolio you would need. They are better suited to the cautious investor. Their personal pension is better than their stakeholder.

You are 55, not 63. You can still have some equity content. Going cash for 10 years (assuming 65 retirement age, but you dont say) is wasteful. Has your friend told you what 5% 10 year guaranteed product he has in mind? Has he told you the costs of holding that within a SIPP which in turn will in effect reduce the 5% down?

Its great that you are reviewing your pension but the logic you are applying to it is flawed. You are jumping around the risk scale from low risk to medium/high without looking at the bits in between. You are treating your pension as one thing and your trackers as another when you should look more holistically and treat the portfolio as combined with multiple goals.

A large portfolio may well be suited for income drawdown and cash is no good for that. Your money doesnt stop being invested when you retire if you do that so the timescale is much longer. What if it is more tax efficient for you not to take the pension but utilise the trackers to provide your retirement income/capital in the early years. What if its a bit of both?

Your contribution is good at £1000-£2000pm and suggests you will have a decent fund value. At that level you either need to be an experienced investor or you need quality advice. I get from your post that neither is the case and that is costing you money.

MoneyTown

Hope-peace, I don't think your Poll makes much sense mate.

I voted for 'Who' lol.

Hope-peace

Please forget the Poll. I had no idea how it works and i tried deleting but it was too late. I am really new to this site.. sorry

Answer to Dunstonh: my friend is not a financial adviser, she just told me what she has done re-pension. i am still not sure what to do..

EdInvestor

You need to stop thinking of a pension as something "safe" (this is a holdover from the days of final salary pensions, now rapidly on the way out) and realise that it has the same risk as any other investment.The "pension" title of the product just refers to its tax status.

So look at your overall retirement savings, and work out your attitude to risk. Is it cautious or medium-high? How old are you?How much have you got already saved? Have you checked out your state pension situation BTW? (This is more importnat than you might realise).

The use "asset allocation" - investing in a mix of lower risk and higher risk funds to achieve your target at your risk level.As Dunstonh says, the CM pension will probably offer better choices in the lower risk area, what funds is it in now?

Whereas ISA savings (are your trackers in a maxi ISA?) will have access to better performing unit trusts.I trust you are using a discount broker for your ISA savings as otherwise you will pay high charges which eat into your capital.

Hope-peace

EdInvestor wrote: »

You need to stop thinking of a pension as something "safe" (this is a holdover from the days of final salary pensions, now rapidly on the way out) and realise that it has the same risk as any other investment.The "pension" title of the product just refers to its tax status.

So look at your overall retirement savings, and work out your attitude to risk. Is it cautious or medium-high? How old are you?How much have you got already saved? Have you checked out your state pension situation BTW? (This is more importnat than you might realise).

The use "asset allocation" - investing in a mix of lower risk and higher risk funds to achieve your target at your risk level.As Dunstonh says, the CM pension will probably offer better choices in the lower risk area, what funds is it in now?

Whereas ISA savings (are your trackers in a maxi ISA?) will have access to better performing unit trusts.I trust you are using a discount broker for your ISA savings as otherwise you will pay high charges which eat into your capital.

Thanks

To answer your question - My attitude to risk is medium-high and even cautious. i know it is confusing. But i will like to consider all the risk as you and Dunstonh suggested i.e. mixing it but i don't know where to start.

I am 38 going on 39 and i have been putting away money for pension for 5 years now.

I have both cash ISA and Maxi ISA which i contribute every year. Maxi ISA is managed by Fiderlity fund who are also managing my stocks portfolio. And Yes i am using a discount broker.

And finaly the CM pension funds are invested in Property, North american pension fund, equity high income pension, CM shroder UK Mid 250, CM IP UK Aggressive pens, CM IP emerging countries Pens, CM fidelity european Pens and CM fidelity american Pens.

Honestly this stock and pension thing confuses me. I feel saver with ING Direct and Hisave which i also have some money there - i can see the interest although small but i have peace..it is silly i know!

My ideal dream for my stock is to be able to draw cash income in 7-10 years hence the reason i've invested in index tracker fund [not sure if this is the right thing though]. And for my pension to get a great/fabulous returns ontop of my contribution..

I'm i asking for too much.. i just need direction.

Once again thanks for your reply.. though i am still lost.

dunstonh

I am 38 going on 39 and i have been putting away money for pension for 5 years now.

OK, i am going to be blunt here. Your friend is an idiot. 5% into cash which will probably lose around 0.2% to cover charges on a SIPP is a complete and utter waste of money.

And finaly the CM pension funds are invested in Property, North american pension fund, equity high income pension, CM shroder UK Mid 250, CM IP UK Aggressive pens, CM IP emerging countries Pens, CM fidelity european Pens and CM fidelity american Pens.

Not a bad spread at all. Indeed, I have utilised 5 of those funds myself on professional recommendations.

Honestly this stock and pension thing confuses me. I feel saver with ING Direct and Hisave which i also have some money there - i can see the interest although small but i have peace..it is silly i know!

You really do need an IFA. Indeed, the one that set up that CM pension seems to have chosen a good spread there so why not stick with them.

I think you need to forget about your friend, indeed forget about a discount broker. Sod it if it costs you more in charges because at the moment your thoughts on what to do and what you are doing are going to cost you far more in the long run. 2007 wasnt a great year for existing investments in most areas. The latter part so losses in most areas. However, for monthly contributions over the long run that is great news for you. You are now buying those investments cheaper.

We cannot teach you how to do things and your confusion coupled with the bad advice your friend is giving you is making the situation worse. You need a good IFA to sort out your mind. Discount brokers and DIY isnt for everyone. Do you service your own car? Do you service your own boiler? Yes if you know what to do but it if you dont you get someone to do it for you.

nearlyrich

I think I am pretty good with money and I have several investments, but when it comes to pension planning my IFA is an expert and I don't begrudge him his commissions on the investments he advises on.

Dunston is right use a good IFA and you will sleep better at night not worrying if you are doing this right!

Retired_I.F.A.

I'll vote for who too.


Dr Who that is as only he knows whats in store for our future

Hope-peace

Dunstonh.. thanks i was not planning to live my IFA but with all your comment i will stick to him. As i said my girlfriend was just telling me what she does and i have showed her your comment and i think she changing her way of thinking too.

And No I do not service my own car - i choose not to drive at all; and do not service my boiler? I get the message and i seem to have the right person to do it at the moment so please be gentle with me .... thanks for all the advise.

Happy new year:)