How confused am I????

Katie_H

So I've been thinking about setting up a private pension ever since I left uni and started work (no company one so has to be private). I've spoken to various people and read stuff on here but I'm still non the wiser (I'm 29 by the way)

I went to see Lloyds and they suggested one of their funds portfolios, was about to set that up when I read about Cavendish so I looked into that. Found a similar portfolio via Scottish widow so thought I was sorted then I read stuff on here. All the IFA's on here seem to think I'm loosing out if I take a pre-arranged portfolio option and I should infact go to an IFA who will tell me which are the best finds to invest in. Apparently their fee will be less than the extra I make. Is this really true??
Why would Lloyds not have suggested this (although she didn't seem to know that much to be honest).

I just want to make the right choice but how will I know I can trust the advise of an IFA?

Why don't Scottish Widow and the like use their best fund in their portfolios? Or are the best funds just the ones with the highest risk (I'm more of a medium risk person).

I just don't know what to do, arrgghhhhhh

dunstonh

All the IFA's on here seem to think I'm loosing out if I take a pre-arranged portfolio option and I should infact go to an IFA who will tell me which are the best finds to invest in. Apparently their fee will be less than the extra I make. Is this really true??

Going into a balanced or cautious portfolio fund is a simple option which has compromises. Buying direct from Scot Wid or Lloyds is not a good option.

When you invest money, you look at where you want to invest and how first. Then you look at charges. The difference in charges may be as little as 0.1% a year. A low cost IFA could actually be cheaper (IFAs are no different to any other service provider. You can get one quoting expensive, one quoting cheap. Usually the cost is no more than going direct and usually less than a tied agent).

The reason Lloyds recommended the portfolio fund is that Lloyds staff are tied agents.

Why would Lloyds not have suggested this (although she didn't seem to know that much to be honest).

They are not independent financial advisers. They are tied reps of Scottish Widows. They cannot build investment portfolios or pick a spread of funds that average out to meet your risk profile. This is why so much from banks ends up in a single fund and why these single fund options exist to cater for them.

I just want to make the right choice but how will I know I can trust the advise of an IFA?

IFAs account for 80% of the products sold in the UK. 60% on advice, 20% on execution only. Yet they only account for 16% of complaints that the FOS receive. Like any profession, there are bad apples.

You seem willing to believe an insurance company rep from a bank salesforce yet dont believe an independent who has no insurance company employer telling them what they can and cannot do.

Why don't Scottish Widow and the like use their best fund in their portfolios?

Whats the best funds? Who says Scottish Widows have the best funds? Potentially the best funds at the moment have been very poor funds 12 months ago. There is no such thing as a best fund.

Or are the best funds just the ones with the highest risk (I'm more of a medium risk person).

It doesnt work like that.

I just don't know what to do, arrgghhhhhh

You are lacking knowledge, which is nothing to be ashamed about. You are cannon fodder for the banks as they thrive on selling their basic and expensive products to people like you. You appear to need advice and a bit of training and an IFA is best placed to give that. Remember that the IFA has access to the Scot Widows products (actually more SW products than the Lloyds rep has). So, if at the end of the day you want a basic investment option then you can always go with the stakeholder pension through the IFA.

EdInvestor

If you want to learn a bit about investment without the confusing rules and regulations relating to pensions, you could start off by using your investment ISA allowance. (7.2k a year, 3.6k if already using cash ISA as of next April).

You should always invest through a discount broker such as

https://www.h-l.co.uk

which rebates charges.

The funds available to an ISA are effectively the same as for a pension and you can move money in an ISA over to a pension later to get tax relief if you want ( but you can't do it the other way round, so why close off an option?).It is better to invest in a pension when you are a high rate taxpayer as you get more tax relief.

dunstonh

You should always invest through a discount broker such as

www.h-l.co.uk

which rebates charges.

HL do not rebate charges on their pension. They only rebate some of the charges on their ISA and Unit trusts.

EdInvestor

There are no initial charges on the funds in their pension IIRC.It is just the trail commission that isn't rebated on pensions (it is on ISAs and unit trusts).This is IMHO reasonable as the admin work on pensions is considerably more onerous than on the other investments, and they otherwise don't charge an annual fee.