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  • FIRST POST
    • aphill24
    • By aphill24 7th Mar 18, 11:49 PM
    • 90Posts
    • 35Thanks
    aphill24
    confused
    • #1
    • 7th Mar 18, 11:49 PM
    confused 7th Mar 18 at 11:49 PM
    Naghten, 58, and Brassey, 53, are both former senior executives at Arcadia group. They first consulted Brimble in 2011 after their employer offered an enhanced payout to staff members in return for giving up their defined benefit pension schemes.

    Brimble advised them to accept the offer. He said moving their money to a self-invested personal pension (Sipp) managed by the insurer LV would give them greater flexibility over what they could invest in, allow them to draw on their funds earlier and mean they could leave more to their children on death — all benefits his clients wanted.

    Brimble told them that in order to achieve the same level of benefit as their final salary schemes, he would need to return 6.5%-6.6% a year, which was “achievable”. Although the pair described themselves as low to medium-risk investors, he invested a chunk of their respective pots in high-risk or unregulated funds that went wrong.

    Over the five years Brimble was advising them, their retirement funds dropped in value by about 35%.
    The article above is from last weeks Sunday times. Can anyone explain how the DB pensions were transferred to a sipp managed by LV and yet this crook Brimble then invested the money in high risk or unregulated funds? What part did LV a household name play in the mismanagement? This is what I can't understand. Fellow workers are transferring out of our final salary scheme using Prudential but how or where do they know where the money is going to be invested?
    Tony
Page 1
    • Brynsam
    • By Brynsam 8th Mar 18, 12:09 AM
    • 963 Posts
    • 633 Thanks
    Brynsam
    • #2
    • 8th Mar 18, 12:09 AM
    • #2
    • 8th Mar 18, 12:09 AM
    Because the two investors authorised him to do so, based on the adviser's recommendations.

    If you transfer out of a final salary scheme, you know exactly where the money is going because you authorise it to go there. Make very sure you understand the destination!
    • BobQ
    • By BobQ 8th Mar 18, 12:13 AM
    • 9,964 Posts
    • 13,101 Thanks
    BobQ
    • #3
    • 8th Mar 18, 12:13 AM
    • #3
    • 8th Mar 18, 12:13 AM
    The article above is from last weeks Sunday times. Can anyone explain how the DB pensions were transferred to a sipp managed by LV and yet this crook Brimble then invested the money in high risk or unregulated funds? What part did LV a household name play in the mismanagement? This is what I can't understand. Fellow workers are transferring out of our final salary scheme using Prudential but how or where do they know where the money is going to be invested?
    Tony
    Originally posted by aphill24
    You would hope that senior executives in Arcadia would be more financially savvy.

    The SIPP is not the issue. The issue is who provided the advice.

    FCA usually require an IFA to assess the transfer of a DB pension based on individual circumstances. You need to be clear on what basis the advice was given.

    Look on the LV website and it states

    We!!!8217;ll analyse your requirements and give advice by making suitable recommendations from our panel of investment products and funds, which is documented in a report and sent to you. We!!!8217;ll then agree a time with you to discuss the recommendations in more detail and answer any questions you may have.
    This implies they do not offer independent advice but are recommending their pet products based on restricted advice.

    There has been a lot of bad publicity on this kind of transfer

    Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.
    • dunstonh
    • By dunstonh 8th Mar 18, 12:34 AM
    • 92,660 Posts
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    dunstonh
    • #4
    • 8th Mar 18, 12:34 AM
    • #4
    • 8th Mar 18, 12:34 AM
    What part did LV a household name play in the mismanagement?
    The clue is in the name "SIPP". SIPPs allow you to invest in all sorts of unregulated things. LV were an instruction taker.
    The article is poorly worded as LV didnt manage it.

    ellow workers are transferring out of our final salary scheme using Prudential but how or where do they know where the money is going to be invested?
    If they have any sense, they wont be using obscure unregulated investments.

    However, when you transfer out of DB schemes into DC schemes, then risks take over and losses are possible. In the scheme of things, a 35% loss is within your typical range. Albeit not in the period in question.


    The biggest issue in pensions for the last 8 or so years has been the use of unregulated investments in SIPPs. Avoid those and stick to mainstream and you wont have the problem.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • aphill24
    • By aphill24 8th Mar 18, 12:48 AM
    • 90 Posts
    • 35 Thanks
    aphill24
    • #5
    • 8th Mar 18, 12:48 AM
    • #5
    • 8th Mar 18, 12:48 AM
    The clue is in the name "SIPP". SIPPs allow you to invest in all sorts of unregulated things. LV were an instruction taker.
    The article is poorly worded as LV didnt manage it.



    If they have any sense, they wont be using obscure unregulated investments.

    However, when you transfer out of DB schemes into DC schemes, then risks take over and losses are possible. In the scheme of things, a 35% loss is within your typical range. Albeit not in the period in question.


    The biggest issue in pensions for the last 8 or so years has been the use of unregulated investments in SIPPs. Avoid those and stick to mainstream and you wont have the problem.
    Originally posted by dunstonh
    Thanks but can you elaborate on the quote please. What would be classed as mainstream as opposed to a sipp, this is what I have been confused about. Is Prudential mainstream?
    I am not interested about doing it myself but it is a really hot topic in my workplace and we neighbour the steel works which has seen lots of friends & families going down this route.
    • Linton
    • By Linton 8th Mar 18, 5:09 AM
    • 9,387 Posts
    • 9,519 Thanks
    Linton
    • #6
    • 8th Mar 18, 5:09 AM
    • #6
    • 8th Mar 18, 5:09 AM
    SIPPs (Self Invested Personal Pension) are tax protected containers in which to place a very wide range of investments. They let you create and run your own pension scheme in a way appropriate for your particular circumstances. The problem is the investments you choose to put in the SIPP.

    Mainstream regulated investments are typically funds that hold shares in a very large number of companies. Or they may hold bonds, a form of interest paying loan, issued by again a large number of companies. If a company runs into difficulties its shares will drop in value and ultimately if the company goes bust its shares and bonds may well become worthless. But the chances of all the companies included in a fund going bust is virtually zero. And in general the returns made by the companies that dont go bust far outweigh the losses from those that do.

    Such funds are regulated by the government through the FCA. Prudential is a large insurance company that amongst many other things sells regulated funds.

    The problematic non-regulated investments are typically interest paying loans to a single company advertised to look like regulated funds or fixed interest bank accounts. The company may well be engaged in highly speculative activities eg hotels in Cape Verde, green recycling, etc. or at worst could be a scam. If the company goes bust then often everything is lost.

    There is nothing wrong in a wealthy investor using a small part of his money to make risky loans. It could be very lucrative. But such an investor needs to know what they are doing and be prepared for a total loss. This type of investing is certainly not suitable for most peoples pensions.
    • dunstonh
    • By dunstonh 8th Mar 18, 10:15 AM
    • 92,660 Posts
    • 59,985 Thanks
    dunstonh
    • #7
    • 8th Mar 18, 10:15 AM
    • #7
    • 8th Mar 18, 10:15 AM
    Thanks but can you elaborate on the quote please. What would be classed as mainstream as opposed to a sipp, this is what I have been confused about. Is Prudential mainstream?
    SIPPs are used by a minority. However, it is a growing minority and one day, SIPPs will be the majority option. Mainly as insurers are selling up and becoming investment companies instead.

    The problem isnt whether its a SIPP or PPP. Its what you hold in it as your investments. A PPP requires the provider to carry out due diligence on the investments offered. A SIPP can invest in around 30,000 things. The SIPP provider is not required to carry out due diligence on those. However, recent rulings have indicated a requirement to do a little due diligence (but nowhere near the same scale as a PPP).

    Pru is a mainstream provider but not a very common choice with IFAs. You tend to find them more on panels on restricted FAs. IFAs tend to use them only in their niche areas where they are good. Pru's product range is rather dated compared to others and not that cost effective. They have one area they are good at and they do it well but that is more of a niche option. In all other areas, they can be improved upon with other providers.

    You can generally spot the unregulated investments very easily. As Linton says above, overseas property (Cape Verde was one particular area that was on a big scam with pension cold callers), biofuels, forestry, student pods, airport parking, storage boxes are all areas which are used by the dodgy schemes. Whereas your mainstream investments will be using unit linked funds which you can view online at places like Financial Express (therefore allowing you to verify the status of the fund - i.e. unit trust/OEIC or pension fund)

    Its difficult to second guess what you will be recommended as we dont know you are being told to transfer into. It could be a section 32 buy out bond/bulk transfer (which tends to use the old insurance companies mainly due to hardly any providers still offering them). Or you could have individual recommendations. The latter seems unlikely if you are all going with Pru.

    If it makes you feel better, once you know the investment funds, you can always post them here and we can tell you if they are regulated or not.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • IanSt
    • By IanSt 8th Mar 18, 10:47 AM
    • 260 Posts
    • 194 Thanks
    IanSt
    • #8
    • 8th Mar 18, 10:47 AM
    • #8
    • 8th Mar 18, 10:47 AM
    Is Prudential mainstream?
    Originally posted by aphill24
    People do need to be mindful that companies can be very creative in the names that they come up with, and I can well imagine that a company on the dodgier side will try their utmost to make their name seem very similar to an already established well known/trusted company.
    • sandsy
    • By sandsy 8th Mar 18, 5:22 PM
    • 1,323 Posts
    • 796 Thanks
    sandsy
    • #9
    • 8th Mar 18, 5:22 PM
    • #9
    • 8th Mar 18, 5:22 PM
    Fellow workers are transferring out of our final salary scheme using Prudential but how or where do they know where the money is going to be invested?
    Tony
    Originally posted by aphill24
    Most advice on a pension transfer also involves the adviser giving a recommendation on where the transferred funds should be transferred to and what they should be invested in. The only time it won't is if customer wants to choose their own scheme and investments (and they'll probably have a hard job finding an adviser who'll advice in the transfer in that case).

    If the adviser recommends a transfer (and they can only do it if they think it's the best thing for you) the adviser has to provide a whole raft of documents saying:
    a) why the transfer is a good idea, and
    b) documenting which pension scheme the money will go to and the investments within that scheme and why that's a good idea too.

    Then before any transfer can take place, the person should receive information about the scheme and how it works, a personalised projection including charges information, and details of the investments.

    So all that information is made available before anyone ever transfers. They just then have to have the tenacity to read through about 200 pages of documents and try and make sense of it!
    • aphill24
    • By aphill24 9th Mar 18, 3:58 PM
    • 90 Posts
    • 35 Thanks
    aphill24
    Thanks for the replies I am wiser for it now and can understand this a lot more.
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