Advice on sorting out my pension?

[geek84]

Good Morning Folks

I have 2 pensions with previous employers to which I no longer contribute.

I recently spoke to an independent financial advisor (recommended by a friend) who suggested that I combine these 2 pensions and put them in an investment which he recommended, because according to him, future income growth would be far greater than what I have now.

Do you suggest that I speak to another 2 or 3 independent financial advisors and then compare the results of each before deciding which investment to put my pensions in, or do you think I should take the advice of this financial advisor and go with the investment that he had advised, since he is independent and has access to the whole market?

Thank you.

 

[EFLImpudence]

Ignore financial advisors.

If they were any good, they'd be rich and retired.

 

[bernardgreen]

Ignore financial advisors.

Good advice.

Most pensions that have adequate funds behind them are best left as is. There are ways of getting more "value" from the contributions but most are medium to high risk of losing value.

 

[JohnD]

This is presumably a leg-pull?

Your adviser is quite likely to recommend something that earns him a fee. He should not be earning commission but if he is advising anything other than a UK Pension company, he might be. Obviously it will be at your expense.

There are some people who claim to be IFAs but are in fact crooks. Have you verified his qualifications? Since the relaxation of pension rules it is much easier for crooks to get their hand on pension pots, which are often substantial sums of money, and fleece the investor.

http://www.moneysavingexpert.com/savings/best-financial-advisers

 

[geek84]

Thanks for your advise, folks

 

[geek84]

Any further advise greatly appreciated.

 

[JohnD]

If you're going for a reputable company and fund, look for low charges from the company and in the fund. Tracker funds will be the cheapest. Of all the characteristics of a scheme or fund, the only one that long-term correlates to good performance is low charges. Naturally, because if your fund earns, say 4% a year average for ten or 20 or 40 years, and the manager charges you 1.5% of it, you will end up with less than if he charges you 0.2%.

1% a year on a large amount, for many years, adds up to a surprisingly large number.

Over the short term, anyone can be lucky and toss "Heads" ten times in a row. This should not make you think they are cleverer than all the other coin-flippers, or should be paid more or are entitled to make higher charges. You don't need to pay an IFA to tell you that. High-charging companies will always try to kid you they are "better" or "cleverer" than all the other fund managers, or have access to extra knowledge. This is never true.

Companies that rely on their customers' ignorance and undeserved trust, such as high-street banks, and Virgin Money, have higher charges than usual because their customers make the mistake of thinking they offer a good deal, without checking. The large life & pension companies have generally had to offer simple, low-cost products because there are so many switched-on customers who refuse to buy anything else. They may also offer complex high-priced schemes as well, to fleece the mug punters.

For simplicity, you could go for a stakeholder pension, and use a tracker fund inside it. The maximum charges permitted by law are no more than 1.5% of the fund’s value for the first ten years, and 1% after that. Some companies like to charge the maximum allowed, which is excessive. Others are fairer. The amount you pay into your stakeholder pension can be as low as £20 per month, and you can pay monthly or weekly. You don’t even have to pay in regularly – you can contribute a lump sum whenever you want.

Apart from Martin's website, you could go to your local library and read the "Which" guides, or try http://www.which.co.uk/money/retire...on-to-personal-pensions/stakeholder-pensions/ and http://www.which.co.uk/money/retirement/guides/should-i-consolidate-my-pensions/ , though I think you have to be a member or at least sign up for the trial period to get access.

As you are not an experienced investor, a SIPP would not suit you.

 

[Jon Peel]

Combining the two will help you keep track of them and has little disadvantage (especially if the size of them is not greater than 30-40k in each. I would move them to a non-employer related scheme. One example is L&G but there are many many more. Once you have moved this to an individual provider, you can choose to allocate these funds in line with their best practices based on your age, retirement age, risk tolerance etc. or you can choose how you want to allocate them yourself. You will be able to see fee breakdowns / sector breakdowns etc.

You may find that because of your work you have exposure to a particular sector you want to avoid investing your pension in that sector. For example, I work in finance and so my fortunes are well correlated to how the finance industry does, so I wouldn't choose my pension to be in invested in the stocks of bank. Like the person above me mentioned, I would invest in tracker funds for various instruments. If you are older then invest in a gilt tracker and if you are younger then invest in a more equity based portfolio. Split this between small cap stocks, large cap stocks, the FTSE / S&P / Nikkei / China / Emerging Market etc. Diversification is key. Also go with commodities etc / fixed bonds / index linked bonds. If you don't like choosing, which based on what you have said then you probably shouldn't, just go with the split that your new provider recommends. ..

 

[geek84]

Good Morning Folks

Many thanks for your advice, especially JohnD.

How can I tell if a company is reputable?

How can I tell if tracker fund are the cheapest?

Finally, I take it that I shouldn't go to an independent financial advisor for advice? If so, who else can I turn to, since I have limited knowledge of pensions?

Thanks

 

[JohnD]

Sadly I am not up to date with this. My own schemes I moved into a SIPP with modest charges, which is not what you need. I formerly worked for two very well-known L&P houses, and I was taken aback at the corporate culture. At one, the people there were convinced they were doing their best to help their clients provide for a secure future, and providing a high-quality, cost-efficient service to do it. The other was out and out dedicated to getting their hands on an much of the punters' money as they could, and providing a high-quality, cost-efficient service to do it. However I subsequently moved into a different industry and lost interest, and the trade is constantly changing.

I agree with Jon that LGEN is a company that is making a good effort in the simple Stakeholder business, which I think is what you should be looking at.

Only a licenced advisor is permitted by law to give you advice, and must spend time gathering information about your personal circumstances first, so there will be a minimum charge of some hundreds of pounds, and you will not get personal advice over the net, only non-specific information.

You might find this article interesting
http://www.telegraph.co.uk/finance/...How-much-are-you-paying-for-your-pension.html

I found this page relating to charges, it is an example of what you should look for.
http://www.legalandgeneral.com/pensions-retirement/stakeholder-pensions/
and it is interesting to compare it with this one
http://uk.virginmoney.com/virgin/pension/popups/ongoing-charges-figure.jsp

If you see a reference to dual-priced funds means that when they sell you units they charge you, for example, £1 each, and when you cash them in, they pay you e.g. 99p, where they are deducting e.g. 1% of the current "value" (though the price per unit will hopefully have grown over time). Years ago, a spread of 5% or 6% was common, so stakeholder pensions are much cheaper and simpler. A workplace scheme can, if it wants to and can be bothered, negotiate lower charges than an individual client, so try to find out the charges on your existing scheme.