which pension then, eh?

Ashmil

Hi all - this looks like a great place to get advice!

If anyone could give me a little advice on pensions, on which I am pretty naive, I would be ENORMOUSLY grateful!

A quick rundown:

I am 28. I joined my new job in a Housing Association a few months back and I need to choose my pension. They have been taking my contributions since I joined and holding them until I choose, but it's taken a bit longer than I expected. Anyway, my employer do not have their own scheme, but provide access to a HSBC stakeholder pension. Or, I may choose one of my own as long as they approve it. My employer will make a 10% contribution if I provide a minimum of 3%. That's pretty good innit? I am on £17,922.

But I wanted to get a bit of advice first, so I've spoken to Frizzell / Liverpool Victoria - free financial advice I have access to via my membership of Unison the trade union. Apparently these advisors do get commission from the product providers if I sign up to their recommendations, but they can recommend anyone from across the market apparently. So as far as I can read it, one could put reasonable faith in their advice, couldn't one? Besides, Unison wouldn't be pushing dodgy, super-biased advisors on their members would they? It wouldn't do them any favours...

Anyway, the advice was that HSBC's stakeholder pension is a bit humdrum, and they reckon a good one is Legal & General's Stakeholder Pension Plan.

So my questions are:

1) How much faith should I have in their advice?
2) Does it sound like good advice?

If I should provide more info to garner the advice of those wiser than I, please do ask...

Very grateful for any pointers anyone can give. Thanks for listening!

Alex

ReportInvestor

Hi Ashmil, welcome to the site.

You are probably getting decent advice, and will get even more on these boards - but the first lesson in financial education is to take nothing for granted.

Ashmil wrote:

Besides, Unison wouldn't be pushing dodgy, super-biased advisors on their members would they? It wouldn't do them any favours...

I'd read this to lose your financial virginity.

Unison suckers fell for their union's recommendation of Britannia BS to start a 25 year personal nightmare in the early/mid 1990s

But Frizzell/ LivVic will be unlikely to land you in such a quagmire. Nowadays it's harder to get away with it. . Good luck with your finances. I wish you a happy financial future

My employer will make a 10% contribution if I provide a minimum of 3%

We are all as jealous as hell . How can these housing associations afford it :eek: ? You've to to go for this as it's a massive amount of free money.

dunstonh

L&G have a very good charging structure. However, they are launching a new pension product in the next few weeks to replace the current contract. The new one has increased charges (to utilise to extra 0.5% annual charge that came in this year). So, if you want the cheap option, get signed up soon.

The only negative on L&G is that their pension service is quite poor. Enough for me to look towards other providers much of the time, unless the client says they want the cheapest stakeholder.

The type of advice you are describing is independent. There are different types of independents (self employed, small partnerships right through to large sales force types). I would generally say avoid the large sales force types as they are often under the old pressures that sales forces always used to be. i.e. sales targets which need to be met to keep the job. However, in this case, the advice seems sound. That shouldnt be a surprise as the vast majority of independents will give good advice.

Ashmil

Great, thanks guys, so it sounds like reasonable advice then so far. Anyone else got any perspectives?

Also, I 'm a little confused about how best to determine the amount of my contribution. I'm currently on the 3% minimum contribution, plus of course that rather nice 10%, but should I up that do you think?

Thanks again for all advice

EdInvestor

Hi Ashmil

There are IMHO three things you need to look at with a company pension offer like this

1)Is the contribution the company is making big enough to make it worth while to lock up my own money in a very restrictive savings vehicle?

The answer here is clearly yes.

2) Are the charges I will have to pay low enough and the terms as flexible as possible to minimise the downside?

If stakeholder terms apply the answer seems to be yes

3.How can I get the money to increase as much as possible before I retire?

This is where the hard work comes in, as you have a choice of provider.You have the option to get the momeny put into the best funds available.

Scroll down here for the HSBC fund selection and further down/over page for L&G's funds

You might like to look at Fidelity as well

If you choose an insurer, often people have done well by putting a portion of their contributions into the Property fund ( not usually available outside insurance companies).Equity income funds are also a better bet for the long term than Growth funds these days.

Ashmil

OK, great advice, thanks, although I am not used to interpreting the tables you provided me with... bit of a financial noob really!

In the light of this ignorance it is worth mentioning that I have read the article on Cavendish and the benefits of their execution-only service. Looks attractive - could I not just take the advice I have received from Liv Vic and set up via Cavendish? Is there any drawback to doing this? Would it leave me a bit vulnerable when monitoring the pension over the years, as it may mean I would not have access to further advice?

Please comment!

Many thanks again

A

dunstonh

could I not just take the advice I have received from Liv Vic and set up via Cavendish? Is there any drawback to doing this? Would it leave me a bit vulnerable when monitoring the pension over the years, as it may mean I would not have access to further advice?

You would get the product cheaper with Cavendish but you would have no consumer protection against bad advice. You would also get no fund recommendation, so you would have to pick your own (experienced investors may not have an issue with that). You certainly wouldnt get advice from LVFS again due to your time wasting. You would also need to check to see if there is a minimum retention fee with the IFA you have seen already. Often, you can incur a small admin charge (upto £100) if you get to a certain stage and then pull out. The key facts/menu document issued to you will disclose that.

You would also need to decide if the new L&G product is going to be better for you than the old one. Cavendish are unlikely to tell you as you want their execution only service which includes no advice.

Having received further details on the new L&G product yesterday, it looks like it is going to be better for some and worse for others.

EdInvestor

Ashmil wrote:

In the light of this ignorance it is worth mentioning that I have read the article on Cavendish and the benefits of their execution-only service. Looks attractive - could I not just take the advice I have received from Liv Vic and set up via Cavendish?

What advice have Liv Vic given you about setting up the pension? They have just suggested one provider (L&G) not the other (HSBC), right?

That doesn't exactly help a lot.What funds are you going to put the money in? Cavendish will need to know that.

If you want to check charges on the two companies' pensions, look here:

https://www.fsa.gov.uk/tables

Although they both are stakeholders, there can be quite big differences.

Ashmil

Thanks - LV have given me details of the funds, but I don't have them on me. I will post back later on. I am not committed in any way to LV at this stage.

I guess it would probably be best to not take the Cavendish route as I am not savvy at all on these matters (why don't they teach this stuff as compulsory in school?) and could do with the extra layer of protection...

More later.

Thankyou!

A

Ashmil

Right, it's been a few days, but I'm back with the details of the funds for the L&G pension suggested by Liv Vic, as outlined above. Again, I'm very grateful for the ongoing input of you folks more knowledgeable than I. The funds are as follows:

40% - L & G Property Fund
40% - L & G Distribution Fund
20% - Newton Balanced

Can you advise, folks? Does this look good?

If you'll indulge me, I'd also like to include one or two other details for you to comment on if you'd be so kind:

Fund Value..........................Rate of Annual Management
Bands (£)............................Charge applicable to Band

0 to 24,999 ..........................1.0%
25,000 to 49,999....................0.8%
50,000 and above...................0.6%

For arranging the plan, L&G will pay commission to your FA worth £194.15 immediately. The amount will depend on the size of the contribution. It will be paid for out of the deductions.

- Also, there is mention of a Payment Protection Plan, in case I become incapacitated. Is this recommended?

- Also I guess it is a good idea to increase the premium in line with average earnings increase every year?

That's it for now. What do you think guys?

Thanks

A

dunstonh

OK, remember we cannot advise here whereas you have sought advise and that is what has been recommended.

The charging structure is fine. However, the charging structure you list there seems to differ from the normal L&G stakeholder which starts at 0.9%. upto £24,999, 0.8% from 25k to 49,999 and 0.7% 50k and above. I can find no reference to a stakeholder with your charging on L&Gs IFA website. No alteration of commissions can make your charging shape either.

It is possible that they are pricing you on the new L&G product being launched shortly but it wouldnt be possible to get quotes on that yet. Sometimes providers will issue an IFA specific product but I wouldnt think LVFS are anywhere near big enough to get that and L&G are not a company that tends to do that. The only thing they tend to do is enhance the commission terms with those that do more business.

Your fund selection is generally cautious. If that matches your investment risk profile, then again, its fine. (80% cautious, 20% balanced is the risk split). The fund mix does suggest the old L&G product and not the new one as its mostly in the fund range where the new product changes.

Waiver of premium/contribution should be recommended on every regular premium. Whether you want it though is your choice.

The increasing option keeps your contributions at the same real value (more or less). I have come across loads (and I mean loads, probably even the majority) that have gone with level premiums in the past with the intention to increase periodically but havent and still remain on contribution levels which were decent at the start but small by todays standards.