Pensions – think I'm being scammed by my adviser

The only concrete advice an advisor can give is how to efficiently save.

Picking funds is no different to playing Roulette, you cannot guarantee you’ll pick a winner, so you spread the risk and pick a range of fund managers with a good track record. Although, at the end of the day, they can still cock up and the funds under-perform.

Ok, but a question: as a Director of a Limited business I can get the business to ‘invest’ money straight into my private pension (saving tax, NI, corp tax etc), but wouldn’t money into an ISA have to go in from my net?

Yes, but as noted above, Pensions are taxed on the way out, and have restrictions on when you can get at them. If you’re a higher rate tax payer, now is probably a good time to be making pension rather than ISA contributions: the changes to how dividends are taxed have come into force, but CT rates are scheduled to come down in the future.

Ok, but a question: as a Director of a Limited business I can get the business to ‘invest’ money straight into my private pension (saving tax, NI, corp tax etc),

Don’t need to be a Director for that. It’s called Salary Sacrifice Pension, which we use at work. The company pay into our pension directly and then pay us our salary less the gross pension contribution. Saves the company employer NI etc on the pension contribution, which they then pay into our pension for us, so the overall cost to the company is the same, but we get the employer’s NI % uplift.

I know one guy here locally who is with St. James. Nice enough guy but lordy wouldn’t trust him with a sweetie stall. Commission led products sales, rather than advice, is what he’s at. Drives a Porsche and a FO Range Rover, wife has a Q7. Kind of a good advert for how well he does..

To follow up on my OP, I spoke to the adviser, and he seemed to understand all of my concerns, especially given the wording in the keyfacts.

He explained that the projections that looked poor are largely down to new regulator requirements for illustrations. They have to take into account inflation at 2.5%, and assume growth of -0.5% for the ‘lower rate’ figure, 2.5% for the ‘mid rate’ and ‘5.5%’ for the ‘higher rate’. So, the quoted values reflect the future equivalent values. Makes for depressing reading.

He said that it is not possible to increase monthly payments on the in-house software, and a new account had to be opened, but this was not classed as a new account for calculation of charges, and would in effect work exactly as if I had just increased my instalments. There was no way around this.

Finally, he explained the charges were an annual charge at 0.25% for the pot value, plus 3% of each contribution as paid, equating to around 1.6% p.a. over the life of the plan.

My main reassurance was that the additional instalments will be on exactly the same terms as my original plan, which is currently worth £57k after 80 monthly payments of £500. I am not sure if my calculations are correct, but I make that an average return of 9% p.a., which seems ok to me.

I am sure I could get better value going elsewhere, but at least I’m not as panicked as I was last night. Thanks for the advice, all.

He explained that the projections that looked poor are largely down to new regulator requirements for illustrations

He is correct.

He said that it is not possible to increase monthly payments on the in-house software, and a new account had to be opened, but this was not classed as a new account for calculation of charges, and would in effect work exactly as if I had just increased my instalments. There was no way around this.

That I simply don’t believe. It would be about the only pension system in the UK that didn’t allow for contributions to change on the fly.

I am sure I could get better value going elsewhere,

Just about anywhere in fact…..

My main reassurance was that the additional instalments will be on exactly the same terms as my original plan, which is currently worth £57k after 80 monthly payments of £500. I am not sure if my calculations are correct, but I make that an average return of 9% p.a., which seems ok to me.

Does this take account of your tax “refund” and employers contribution?

Finally, he explained the charges were an annual charge at 0.25% for the pot value, plus 3% of each contribution as paid, equating to around 1.6% p.a. over the life of the plan.

With HL, etc each new investment will cost you about £10, or less if a regular payment. It mounts up…

Loads of tables / info on SIPP costs in Telegraph finance section….

As a general rule, any pension company with Reps driving round in posh cars selling you commission based products is going to be more expensive than a SIPP. HL is more expensive as SIPPs go, but their online tools are excellent…..

Take the opportunity to move to a different provider, now. SJP’s rates are unbelievably high, they prey on people’s ignorance of pensions, can’t demonstrate any added value for what they charge and they will have cost you a fortune by the time you retire. It is literally the difference between receiving an adequate pension and being happy in retirement, or not having enough to get by and living with the certain knowledge that you paid for those greedy price-gouging baskets to drive RRovers.

Ok, i may as well put my hand up here. I am pretty ignorant with pensions and am exactly the guy you have described mile_p. I have just signed on the dotted line with SJP.

In all honestly never once did i feel i was getting a hard sell. But this thread has really got me thinking.

So i am 4 months in at £500 a month through a limited company so fairly tax efficient.

Do i stay or bail with the full exit fees attached and try and find a better deal now. I will NEVER be much better informed about pensions which is why i will hppily pay for good advice

Machtheknife, that’s the position I was in 80 months ago, so I’ve paid in £40,000 and its now worth £57,000. just as a guide.

I’m really confused now, because I just had a chat with the group finance director where I am contracting. Very switched on guy, and he has had the same pension as me with SJP, since ’92. he is really please with it, and says it has been worth every penny, compared with having to manage a SIPP. He also confirmed that it’s true that they can’t just increase monthly instalments on existing accounts, but have to add it as an extra account. This however doesn’t incur any additional fees normally associated with new plans.

Lots of conflicting opinions on this, the more I dig.

Marking to re-read later

Hey ormancheep, the whole subject pickles my head TBH, I’m not a complete nugget but financial advice ill happily pay for if it not only saves me money but makes me money. That’s a no brainier so opening and taking care of a SIPP would not work for me and i am very well aware of that. BUT the problem is finding someone who has the expertise to invest your money for you over a long period of time and not rip you off. I think I’ll stick this out for a couple of years and see how it progresses. I’m still putting a load into a Stocks and Shares ISA and I have property as well so I’m not throwing everything into one basket.

1) You get 40% back on the contributions which means you’re investing out of your gross income into the pension
2) At 55 (depends on your age) you can take 25% tax free
3) The pension itself will be taxed, but as it’s likely to pay out less than you originally earned, you’ll be paying less higher rate tax

Id always assumed there’s then nothing to stop you putting your lump sum into ISAs (limit is now 20k pa) over a number of years as a way to get tax free income from part of your pension.

Machtheknife, that’s the position I was in 80 months ago, so I’ve paid in £40,000 and its now worth £57,000. just as a guide.

To see if that’s good or bad, you need to have a look at the main market indices over that period for wherever you invested your money.

Looking over 1-2 years is pretty meaningless with pensions, as in the 30+ years it will be invested there will be several crashes and several bull runs in the markets…

Yes I would rerun the contributions and divi payments over the investment timescale, say at ftse 100 levels. The difference v what they achieved is whether they provided good value.

I have a mixture of pension products, Diversification really is the key. I don’t study their performance too closely but my managed funds don’t seem to do anything, my own investments in btl beats all the others hands down.

Be aware you pay these fees irrespective of performance

Also worth doing you analysis in $ as post Brexit the £ has devalued 15% which makes overseas funds look 15% better, when in actual fact your purchasing power hasn’t really changed….

Also worth doing you analysis in $ as post Brexit the £ has devalued 15% which makes overseas funds look 15% better, when in actual fact your purchasing power hasn’t really changed….

How did you work that out?

How did you work that out?

See that jump around the date of Brexit in this US based fund priced in GBP…

That’s not the fund gaining 10%, it’s the £ falling 10%…

So the £ devaluation makes you seem 10%-15% better off, until you try and buy something imported, like an iPhone, which costs the same in $, but is now 10-15% more in £…

Long term (as inventories run down), more and more UK prices will adjust upwards as we’re a net importer and so the devaluation will get passed on to the consumer. Immediately post Brexit, if you cashed in your overseas stocks and bought imported products ex stock from UK suppliers you could have realised a ‘real’ gain.

Untitled by Ben Freeman[/url], on Flickr

NB Once we finally enact Article 50, I’d expect to see another 10-20% devaluation….

So the £ devaluation makes you seem 10%-15% better off, until you try and buy something imported, like an iPhone, which costs the same in $, but is now 10-15% more in £.

Hmmmm kind of

He’d be worst off if he didn’t have any USD exposure though wouldn’t he ?

And he’s better off than those that don’t have any usd exposure…. and on the basis that all we really wanna be doing is beating the bloke next door or some fella on the interweb … He is in fact better off

*Bookmarked for later*

As desperate to start a pension, and as a Ltd Co. Director, I need to get (Any) advice..

He’d be worst off if he didn’t have any USD exposure though wouldn’t he ?

That’s not my point.

My point is that if you look at your statement and see a 15% rise in the last few months, that’s not your brilliant advisor / fund, it’s just an artefact of the devaluation. So, when working out if your funds are beating the market you need to account for the devaluation. After all, you’d have got the same kick if it was just sat in a 0% interest US savings account, but that wouldn’t be a good investment choice long term.

NB I moved one of my SIPPs into 100% US funds two weeks before Brexit, with the intention of buying back into £ when the £/USD hits parity, but as we’re delaying Article 50, I’m still waiting….

My point is that if you look at your statement and see a 15% rise in the last few months, that’s not your brilliant advisor / fund, it’s just an artefact of the devaluation.

Yes you’re quite right … not sure that was clear previously.

What the OP has to question then is, would he himself or another adviser have been clever enough to have overseas exposure in the first place (you’d hope so)

and

Parity for USD/GBP 8O…. a 25% devolution from these depressed levels… not so sure about that.

My point is that if you look at your statement and see a 15% rise in the last few months, that’s not your brilliant advisor / fund, it’s just an artefact of the devaluation.

That’s clearer. Though it could be argued that foreign funds are being held as a specific play on the squid.

If you get a contact from an Mr A M from a firm in Glasgow, then do what he suggests.

He’s a quiet member on here, looks out for questions on pensions, an avid cyclist, an all round good bloke and has saved me a fortune on my pensions. If you put your email address in your profile it might help.