Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • SamChamp
    • By SamChamp 13th Jul 18, 12:34 PM
    • 1Posts
    • 0Thanks
    SamChamp
    Pension far less than expected
    • #1
    • 13th Jul 18, 12:34 PM
    Pension far less than expected 13th Jul 18 at 12:34 PM
    Hi,

    Wonder if anyone can advise. My father is due to retire shortly and is paying into 4 private pension schemes. However the value of them is nowhere near what they were sold to him as.

    For example... Pearl have given details on the original paperwork that when he started the pension he would have a pension of 175 per week and now have sent him information two months before retiring that it will be 38per week.

    Is this classed as miss selling and can anything be done as it isnt anywhere close. This is the biggest of his pensions pots so its quite worrying after paying into 4 to be prepared for the future.

    Thanks
Page 1
    • Drp8713
    • By Drp8713 13th Jul 18, 12:42 PM
    • 811 Posts
    • 695 Thanks
    Drp8713
    • #2
    • 13th Jul 18, 12:42 PM
    • #2
    • 13th Jul 18, 12:42 PM
    Do you know how much he had been paying and over how many years?

    It is probably an annuity quote so a. He doesnt have to buy an annuity and b. He doesnt have to use them for the annuity, he can shop around.

    But 38 a week is 2000 a year. Roughly speaking you would need a pot of 50k to yield 2k a year. If hes been saving for 30 years he would have only been saving 60 a month to get 50k? If that is the case he cant have been saving 60 a month and expect to get 750 a month back!
    • lisyloo
    • By lisyloo 13th Jul 18, 12:50 PM
    • 22,019 Posts
    • 10,700 Thanks
    lisyloo
    • #3
    • 13th Jul 18, 12:50 PM
    • #3
    • 13th Jul 18, 12:50 PM
    A few thoughts



    when he started the pension he would have a pension of 175 per week

    How old is this paperwork and what growth rates does it assume?
    When projections are given they include growth rates (nowadays 3 growth rates are used e.g. 2%, 4%, 6%).
    If this is deacdes old paperwork then it may be the assumptions have not materialised.


    that it will be 38per week

    As above. If this is their offer of an anuity, he doesn't have to take it, he should shop around.


    Is this classed as miss selling

    How recent is the paperwork and is it a project of what is could be?


    Have you considered getting a free 1/2 hour with an independent financial advisor?
    • dunstonh
    • By dunstonh 13th Jul 18, 12:55 PM
    • 93,396 Posts
    • 60,896 Thanks
    dunstonh
    • #4
    • 13th Jul 18, 12:55 PM
    • #4
    • 13th Jul 18, 12:55 PM
    Pearl have given details on the original paperwork that when he started the pension he would have a pension of 175 per week and now have sent him information two months before retiring that it will be 38per week.
    Did he stop paying into them?
    Did he continue to top them up periodically to maintain a real terms value?
    Are the projections from very very many years ago when investment returns were higher and annuity rates double what they are today?
    How much was he paying each month?

    Is the annuity figure a real figure from Phoenix or still just a statement projection (current statements are giving figures that can be as much as half what is actually achievable. Going from one extreme in the 80s to where we are now).
    Is this classed as miss selling
    No. The regulator sets the projection rates and terms. Not the company.
    and can anything be done as it isnt anywhere close.
    Statements and projections are issued every year using assumptions that reflect the changes that have occurred over the years. So, this lower value is not out of the blue. The assumption rates were first lowered back in 1994 and have been on a downward trend since then.

    What action did he take to counter the lowering of investment returns and interest rates as the annual statements would have shown?
    Last edited by dunstonh; 13-07-2018 at 12:57 PM.
    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.
    • xylophone
    • By xylophone 13th Jul 18, 1:20 PM
    • 25,767 Posts
    • 15,223 Thanks
    xylophone
    • #5
    • 13th Jul 18, 1:20 PM
    • #5
    • 13th Jul 18, 1:20 PM
    He might like to book an appointment with Pensionwise for an explanation of his options?

    https://www.pensionwise.gov.uk/en/appointments

    Is he about to reach State Pension Age?

    https://www.gov.uk/check-state-pension
  • jamesd
    • #6
    • 13th Jul 18, 2:27 PM
    • #6
    • 13th Jul 18, 2:27 PM
    Pearl have probably quoted the income that an inflation-inked annuity that they would like to sell him would provide. Fewer than one in ten of the annuities sold are of this type and the deals from the firms where the money is invested have tended to be so much worse than the best available ones that the firms are required to tell customers that they are allowed to buy from somewhere else.

    The quote is also probably assuming he's in good health and has no lifestyle factors that would reduce his life expectancy. Taking those into account can pay substantially more. He can get some idea of what is possible by requesting quotes from here. There's no obligation to buy.

    If he's close to state pension age he has an option that can pay almost twice as much inflation-linked income per Pound spent as an annuity. You get this by deferring your state pension until later. For each year you defer it'll be increased by 5.8%. Say his state pension is 8000 a year and he has 40000 in his pot. He could put the pot into drawdown, probably after transferring first, then draw 8000 a year from it for five years. Then he can claim his state pension. It'll be higher by 5.8% times five, so an extra 2320 a year, 44 a week.

    I've yet to see any seller of annuities which mentions state pension deferral.

    It's also fine to use drawdown for long term income instead. How much income you can prudently take this way depends on how flexible you are about the income level and the investments you plan to use.

    Pearl are allowed to mislead him about the full range of options available to him by only telling him what their products do. For example, if the product he's in now doesn't offer drawdown they could tell him that he can't do drawdown instead of telling him that he can do drawdown by transferring first.
    Last edited by jamesd; 13-07-2018 at 2:31 PM.
    • dunstonh
    • By dunstonh 13th Jul 18, 3:19 PM
    • 93,396 Posts
    • 60,896 Thanks
    dunstonh
    • #7
    • 13th Jul 18, 3:19 PM
    • #7
    • 13th Jul 18, 3:19 PM
    I've yet to see any seller of annuities which mentions state pension deferral.
    To be fair, they wouldnt be allowed to.

    Pearl are allowed to mislead him about the full range of options available to him by only telling him what their products do.
    Actually, Phoenix (ex Pearl) are not too bad and don't mislead. They are slower than most and wont let you jump to the end decision and make you go through their process.

    I have a copy in front of me of what they issue and it mentions full UFPLS. Annuity. flexi access drawdown, phased UFPLS, deferment, transfer to another pension or combination of methods.

    In an earlier stage of the process, they ask the person what methods they would like a quote on the annuity (allowing multiple selections). In this case, I chose the options I wanted quoted and there are four different figures given. It also has, in bold text, a box detailing other types of annuity and an explanation that indexed annuities start lower

    As retirement packs go, its not actually that bad. Perhaps too long that some people dont read it? (18 pages in this particular one I have).
    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.
    • kidmugsy
    • By kidmugsy 13th Jul 18, 3:25 PM
    • 11,062 Posts
    • 7,620 Thanks
    kidmugsy
    • #8
    • 13th Jul 18, 3:25 PM
    • #8
    • 13th Jul 18, 3:25 PM
    Pearl are allowed to mislead him about the full range of options available to him by only telling him what their products do.
    Originally posted by jamesd
    What a shameful way to phrase your point, jamesd.
    Free the dunston one next time too.
  • jamesd
    • #9
    • 13th Jul 18, 3:28 PM
    • #9
    • 13th Jul 18, 3:28 PM
    That actually seems pretty good. Hard to win on the length issue.
  • jamesd
    What a shameful way to phrase your point, jamesd.
    Originally posted by kidmugsy
    What's shameful is firms being allowed to do it. My warning shouldn't be necessary but it is.

    You've undoubtedly seen the people who have come here for help after not being told their options or being told that they can't or aren't allowed to do things they can do.
    Last edited by jamesd; 13-07-2018 at 3:33 PM.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,893Posts Today

8,929Users online

Martin's Twitter