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    • John_30033
    • By John_30033 11th Apr 18, 5:37 PM
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    John_30033
    PruFund Pension Cautious
    • #1
    • 11th Apr 18, 5:37 PM
    PruFund Pension Cautious 11th Apr 18 at 5:37 PM
    Hello,

    I have had a meeting with an IFA regarding the possible transfer of my final salary pension. I am now awaiting a CETV from my former employer. They have told me that it will be "in the region of 320,000".
    The FA has said that IF the transfer were to take place and I was to ask them to manage it, their intention would be to put it into the PruFund Cautious Pension fund. From googling around I can see that that fund currently has an "Expected Growth Rate" of 5.5%.
    My question (borne out of great ignorance in this area) is; Am I correct in thinking that I would get 5.5% minus the FA management fee (0.5% I believe), or are there fees to be paid to Prudential as well?
    I understand about the effects of inflation and that the EGR changes of course, but as a starting point for trying to put figures into a spreadsheet can I assume that whilst the EGR stays at 5.5% my money will grow at 5% year on year?

    Thanks a lot,
    John.
Page 1
    • Thrugelmir
    • By Thrugelmir 11th Apr 18, 5:40 PM
    • 59,543 Posts
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    Thrugelmir
    • #2
    • 11th Apr 18, 5:40 PM
    • #2
    • 11th Apr 18, 5:40 PM
    can I assume that whilst the EGR stays at 5.5% my money will grow at 5% year on year?
    Originally posted by John_30033
    No. As the investment returns are not guaranteed. Far better to be more cautious then anything above is a bonus.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • John_30033
    • By John_30033 11th Apr 18, 5:46 PM
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    John_30033
    • #3
    • 11th Apr 18, 5:46 PM
    • #3
    • 11th Apr 18, 5:46 PM
    Thanks for taking the time to reply. I must admit I'm confused though. What calculation should I be using? Again, as I said, I understand that the % can vary, but IF it were to stay at 5.5% throughout a year, would there be any other deductions besides the FA's fee that I would have to factor in?
    • dunstonh
    • By dunstonh 11th Apr 18, 6:09 PM
    • 93,978 Posts
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    dunstonh
    • #4
    • 11th Apr 18, 6:09 PM
    • #4
    • 11th Apr 18, 6:09 PM
    The FA has said that IF the transfer were to take place and I was to ask them to manage it, their intention would be to put it into the PruFund Cautious Pension fund.
    its a niche fund aimed at extremely cautious investors. Typically not the sort of investor that pulls out of a defined benefit scheme.

    My question (borne out of great ignorance in this area) is; Am I correct in thinking that I would get 5.5% minus the FA management fee (0.5% I believe), or are there fees to be paid to Prudential as well?
    Returns are normally quoted net of charges. Pru has charges. They dont do it out of love.

    I understand about the effects of inflation and that the EGR changes of course, but as a starting point for trying to put figures into a spreadsheet can I assume that whilst the EGR stays at 5.5% my money will grow at 5% year on year?
    Personally, I would not project that fund on 5.5% p.a. basis. With interest rates expected to rise, that will hit the returns on the high fixed interest sector investments held within it (nearly 60% fixed interest sector). Long term maybe but short/medium term is likely to be lower (as much as ones crystal ball allows). The last 8 years have been good for it. Investments like this always do better when interest rates are falling and remain low. They suffer when interest rates rise.

    under project and get more is better than over project and get less.
    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.
    • John_30033
    • By John_30033 11th Apr 18, 6:13 PM
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    John_30033
    • #5
    • 11th Apr 18, 6:13 PM
    • #5
    • 11th Apr 18, 6:13 PM
    "Returns are normally quoted net of charges"

    Cool. That's all I was after. LOL, but thanks for all that other stuff!
    • Brynsam
    • By Brynsam 11th Apr 18, 6:46 PM
    • 1,439 Posts
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    Brynsam
    • #6
    • 11th Apr 18, 6:46 PM
    • #6
    • 11th Apr 18, 6:46 PM
    "Returns are normally quoted net of charges"

    Cool. That's all I was after. LOL, but thanks for all that other stuff!
    Originally posted by John_30033
    Maybe you should take note of the comment above: its a niche fund aimed at extremely cautious investors. Typically not the sort of investor that pulls out of a defined benefit scheme.
    • John_30033
    • By John_30033 11th Apr 18, 6:47 PM
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    John_30033
    • #7
    • 11th Apr 18, 6:47 PM
    • #7
    • 11th Apr 18, 6:47 PM
    okay. cheers.
    • RADDERS
    • By RADDERS 11th Apr 18, 8:36 PM
    • 235 Posts
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    RADDERS
    • #8
    • 11th Apr 18, 8:36 PM
    • #8
    • 11th Apr 18, 8:36 PM
    Maybe you should take note of the comment above: its a niche fund aimed at extremely cautious investors. Typically not the sort of investor that pulls out of a defined benefit scheme.
    Originally posted by Brynsam
    Surely it depends why you came out of the defined benefit scheme ?
    I came out of my scheme when I realised that as I had 9 years until my DB pension age if anything had happened to me, hubby would not have got a pension only my contributions returned as I am no longer a member of the scheme. As a really cautious person my IFA recommended the pru cautious fund.
    • John_30033
    • By John_30033 11th Apr 18, 9:28 PM
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    John_30033
    • #9
    • 11th Apr 18, 9:28 PM
    • #9
    • 11th Apr 18, 9:28 PM
    Surely it depends why you came out of the defined benefit scheme ?
    I came out of my scheme when I realised that as I had 9 years until my DB pension age if anything had happened to me, hubby would not have got a pension only my contributions returned as I am no longer a member of the scheme. As a really cautious person my IFA recommended the pru cautious fund.
    Originally posted by RADDERS
    Absolutely correct. I really do appreciate people taking the time to respond to my question, but I can't help but be a little irritated by slightly condescending and unnecessary comments such as "Pru has charges. They dont do it out of love." plus absolutely no thought given to the possibility that there might be more reasoning for considering a transfer than simply getting a better return at retirement time.
    • Malthusian
    • By Malthusian 12th Apr 18, 10:03 AM
    • 4,483 Posts
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    Malthusian
    Surely it depends why you came out of the defined benefit scheme ?
    I came out of my scheme when I realised that as I had 9 years until my DB pension age if anything had happened to me, hubby would not have got a pension only my contributions returned as I am no longer a member of the scheme. As a really cautious person my IFA recommended the pru cautious fund.
    Originally posted by RADDERS
    Was term assurance life cover for nine years considered?

    In general I am sceptical of any recommendation to transfer out of a scheme offering real guarantees (defined benefit pension) and into a scheme offering pretend guarantees (With Profits).

    Transferring out of a defined benefit scheme is a very high risk transaction which the regulator considers unsuitable nine times out of ten. This means that if the investor is "really cautious", other options - such as life cover - should be considered first.

    That said if life cover was impractically expensive and the spouse's pension was an important part of your husband's retirement income needs, it wouldn't have been very cautious to risk losing it, so I'm not saying it was a bad idea.
    • RADDERS
    • By RADDERS 12th Apr 18, 5:16 PM
    • 235 Posts
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    RADDERS
    Was term assurance life cover for nine years considered?

    In general I am sceptical of any recommendation to transfer out of a scheme offering real guarantees (defined benefit pension) and into a scheme offering pretend guarantees (With Profits).

    Transferring out of a defined benefit scheme is a very high risk transaction which the regulator considers unsuitable nine times out of ten. This means that if the investor is "really cautious", other options - such as life cover - should be considered first.

    That said if life cover was impractically expensive and the spouse's pension was an important part of your husband's retirement income needs, it wouldn't have been very cautious to risk losing it, so I'm not saying it was a bad idea.
    Originally posted by Malthusian
    No we never considered term life assurance as to be honest in the grand scheme of things my pension is not important. We can afford to live off hubbys pension and we also have savings.
    Also for me the scheme was in defecit which was another worry so I have transferred out to the Pru and am very happy with my decision.
    • bostonerimus
    • By bostonerimus 12th Apr 18, 6:10 PM
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    bostonerimus
    I worry when people with limited financial knowledge transfer out of define benefit plans and put their trust in an IFA. They will have to pay IFA fees and there will be no guarantee of investment returns or the quality of the advice given. Rather than requiring IFA advice on such transfers I'd like there to a requirement for people to pass a test of financial knowledge before they can do it.
    Last edited by bostonerimus; 12-04-2018 at 6:13 PM.
    Misanthrope in search of similar for mutual loathing
    • zolablue25
    • By zolablue25 12th Apr 18, 6:25 PM
    • 1,584 Posts
    • 469 Thanks
    zolablue25
    I worry when people with limited financial knowledge transfer out of define benefit plans and put their trust in an IFA. They will have to pay IFA fees and there will be no guarantee of investment returns or the quality of the advice given. Rather than requiring IFA advice on such transfers I'd like there to a requirement for people to pass a test of financial knowledge before they can do it.
    Originally posted by bostonerimus
    But the whole point of having specialists, in any field, is so that you don't need to learn everything about every subject in life.

    Now, if the IFA can't be trusted to give you decent quality of advice then there is something wrong with the IFA system which should be fixed - not expect everyone to learn the ins and outs of the financial system before they can invest their money.
    • Ganga
    • By Ganga 12th Apr 18, 7:12 PM
    • 1,184 Posts
    • 604 Thanks
    Ganga
    Absolutely correct. I really do appreciate people taking the time to respond to my question, but I can't help but be a little irritated by slightly condescending and unnecessary comments such as "Pru has charges. They dont do it out of love." plus absolutely no thought given to the possibility that there might be more reasoning for considering a transfer than simply getting a better return at retirement time.
    Originally posted by John_30033
    You do not always get the answer you would like but the person who took the time to reply has an awfull lot of knowledge on the subject and gives help for nothing,do not knock it
    ITS NOT EASY TO GET EVERYTHING WRONG ,I HAVE TO WORK HARD TO DO IT!
    • bostonerimus
    • By bostonerimus 12th Apr 18, 7:40 PM
    • 2,136 Posts
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    bostonerimus
    People should have enough knowledge to judge the quality of the advice given. The transfer of a DB pension is probably the most important financial decision most people are going to make and they should take the time to understand what's going on rather than just trusting to an IFA.
    Misanthrope in search of similar for mutual loathing
    • RADDERS
    • By RADDERS 12th Apr 18, 7:59 PM
    • 235 Posts
    • 263 Thanks
    RADDERS
    I worry when people with limited financial knowledge transfer out of define benefit plans and put their trust in an IFA. They will have to pay IFA fees and there will be no guarantee of investment returns or the quality of the advice given. Rather than requiring IFA advice on such transfers I'd like there to a requirement for people to pass a test of financial knowledge before they can do it.
    Originally posted by bostonerimus
    Not sure if this is meant for me or not, but I worked in the finance sector for nearly 30 years so understand exactly what risks I am taking. But it is my call
    • Thrugelmir
    • By Thrugelmir 12th Apr 18, 8:09 PM
    • 59,543 Posts
    • 52,847 Thanks
    Thrugelmir
    The transfer of a DB pension is probably the most important financial decision most people are going to make and they should take the time to understand what's going on rather than just trusting to an IFA.
    Originally posted by bostonerimus
    The IFA isn't making the decision though. Simply providing the options available. People may have any number of reasons to follow a particular course of action.

    Fads come and go. As soon as the headlines report fingers getting burnt. Attention will be switched elsewhere. Until the next generation comes along. Life is cyclical.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • bostonerimus
    • By bostonerimus 13th Apr 18, 2:22 PM
    • 2,136 Posts
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    bostonerimus
    Not sure if this is meant for me or not, but I worked in the finance sector for nearly 30 years so understand exactly what risks I am taking. But it is my call
    Originally posted by RADDERS
    No, my post was a general comment. I think people should have the freedom to do what they like with their money, but they also need the knowledge to make sensible decisions or at least to evaluate the professional advice they are given.

    Whether a DB transfer is a good idea depends on many factors and circumstances. I have actually gone both ways.....I cashed out one small DB plan and also took a one time chance to buy into one because at age 53, a $280k lump sum payment got me an index linked $20k annual lifetime income starting at age 55.
    Misanthrope in search of similar for mutual loathing
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