Private Pensions

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I wonder if....oh yes....Maybe you just need to look at Jamie's Public Profile to find the answer

Yep. Never hidden it.

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Well, they are a gamble, if not a lottery. I suppose an IFA is akin to a racehorse tipster; he may know more about 'form' than the average bloke but there's still no guarantee he'll be right in his predictions about winners.

In essence possibly. However a tipster with 20 years form (in the nicest sense) may well have built up considerable experience to mitigate risks with common sense and practical application. Plus, while I have no idea of the qualifications required by a tipster, try looking at what an IFA needs to hold to practice now.

In common with many other posts; Do hedge your bets. Don't see a tied 'adviser' (or anyone with restricted levels of advice). DO apply common sense and do what you feel is appropriate. An adviser advises, doesn't tell, you what to do, or at least that's the way it should be.

Mike

I think the IFAs have a serious image problem and are viewed in the same league as estate agents and double glasing salesmen. In other words, unprincipled scum.

Swindon is home to Allied Dunbar who spent millions of pounds advertising in the national press for salemen.

The adverts were always on the line of "become a self employed salesman and you will make a fortune". Therefore you become an IFA to make a fortune.

That sort of advert when repeated and repeated gives IFAs an extremely bad image which is going to take years to overcome.

Regards

Mick

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Swindon is home to Allied Dunbar who spent millions of pounds advertising in the national press for salemen.

The adverts were always on the line of "become a self employed salesman and you will make a fortune". Therefore you become an IFA to make a fortune.

That sort of advert when repeated and repeated gives IFAs an extremely bad image which is going to take years to overcome.

Ah well, now there's the rub. Salesman for Allied Dunbar are not IFAs. They are Allied Dunbar salesman. D'ya see?

Jamie

What you say is true but my point is that years of adverts saying "become a financial services salesman and earn a fortune" creates a bloody awful image. IFA or salesmen, they all get tarred with the same brush.

Regards

Mick

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An IFA is just a middle-man waiting to make money out of your investment; they're not doing it because they love you.

Actually you know, I kinda do. I owe my clients a duty of care. I set great store by listening to what they do and don't like and explaining clearly and succinctly what they should and shouldn't do and why. I love being able to show people what a clever bastard I am and I love meeting folks regularly when I get to show people how much wealthier I've made them, how much tax they've saved from Gordon and how, even after income has been drawn say, their investments have still grown. I'm disappointed when occassionally a client admits they didn't understand why they did what they did, even if they're glad they did. I would be absolutely mortified if they felt the plans didn't suit their requirements after all. I am left with a nasty taste when I see what some people have done, whether through tied advice or as a result of direct advertising (caveat emptor and all that though).My business is based on trust and those clients trusting me and seeing what I do for them and returning when they need more advice because they trust me, ensures my business thrives. Undoubtably I could earn more in other parts of the Financial sector (though don;t get me wrong, I do all right...), however I would not be doing my bit against the greedy hordes which can pollute this and every industry.

Mike - Firstly, I was a very green 19 year old and was told by a family member that Equitable Life had no middle men and therefore was a good bet. I didn't know better at the time. I guess none of us did.
I'm a Structural Engineer and will need to keep my £2m insurance running for 12 years after I retire as I will still be accountable. That'll cost me £40k at current rates but will of course rise with time. It was costly for us when the twin towers came down because we are paying for it now in our insurance premiums. Apparently Structural Engineers were to blame (!). We were expected to find a cure for gravity somehow.
I have no problem with IFA's doing their job, and I shouldn't have said "just a middle-man making money out of your investment", as of course the advice is there, but I do believe that in my experience pension funds are not the best way, and I am happier finding a way to make an income without me having to work. I wasn't slagging the IFA's, but merely expressing distrust of pension schemes.
My pointing out that Jamie was an IFA was because his replies were met with surprise, which are of course understandable when one realises what he does. I wouldn't slag off anyone's profession and I didn't, just pointed out that this is a business and people have to be paid from the money handed over. I love you too Jamie.

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How would you feel about this for a deal - "If your endowment fails to reach its target, we'll top it up. If it makes a surplus, we'll take it."

Sounds excellent. Where do I sign?

Allan

Mike,

I've read it again. As my endowment policy is projected to have a large shortfall it still sounds like a good deal to me. What's the catch?

Allan

Mike,

It is with profits but you havn't seen my figures. Tell you what, if you're confident about your blanket view on endowment policies I'll enter into a legal agreement with you. If my policy makes a surplus I will pay it over to you, if it falls short you can pay me the difference. How's that?

Allan

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Originally posted by Tarquin Maynard-Portly:
Do you actually beleive that *everyone* who claims they where "missold" an endowment did not realise that the vaalues could fall?

How would you feel about this for a deal - "If your endowment fails to reach its target, we'll top it up. If it makes a surplus, we'll take it."

I can only speak for myself. I was convinced by the salesman's spiel that the endowment would *definitely* pay off the mortgage and would *probably* produce a healthy surplus. So, I wasn't counting on a large surplus, but was relying on the endowment paying off the mortgage (which was of course the whole reason for taking out the policy in the first place).

As the most recent advice I had from the insurance company was that the predicted shortfall was in the region of £30k, I perhaps foolishly took the money and ran, otherwise I'd be only too happy to accept your kind offer.

Pay a good IFA to do the thinking for you. I pay mine a lot (150 GBP monthly), and I believe he beavers away diligently on my behalf (I keep any commission). We meet once a year when he shows me fancy graphs which apparently mean a happy retirement. I may be naive, but I believe in trusting professionals to do their job.

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Of course, Alan

What a sensible suggestion.

Mike,

My post was designed to make you stop and reconsider that endowment policies may not be as rosey as you imply.

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Would you care to post the figures here?

Ok. I received an annual statement about two weeks ago so the figures are still fairly fresh in my mind.

Basic sum assured = £30K, termination date May 2015. Projected values at termination date:

Assuming 4% growth = £16K
Assuming 8% growth = £21K

Who's to say what the terminal bonus will be in 9 years time, it's anyones guess but I would be very surprised if it amounted to the 30-50% necessary to meet the shortfall.

BTW, what are Terminal Bonuses calculated on, is it the sum assured or the capital in the policy? If it's the latter then I'll be relying on a bonus of 50-100%!!

Allan

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Who's to say what the terminal bonus will be in 9 years time, it's anyones guess but I would be very surprised if it amounted to the 30-50% necessary to meet the shortfall.

BTW, what are Terminal Bonuses calculated on, is it the sum assured or the capital in the policy? If it's the latter then I'll be relying on a bonus of 50-100%!!

TB calculation method's vary considerably as does the level of bonus/performance but it was not uncommon for 25 year w/profit policies to have TB's in excess of 100% based on sum assured + attaching bonuses until recent years equity falls (and subsequent rises). They can snap back very quickly. For instance I've seen a number of statements recently from a firm with an East Anglian history (who are in no way the best provider in the world) which only last year had hefty MVRs still being applied but now have no MVRs and 15% TB's again all of a sudden (on a 5/6 year history). Not really surprising when even a half way decent, straight equities fund has made 70%in the last 3 years.

Although I've just seen another from Amanda Lamb's favourites which shows just 10% TB after 16 years. Still tha's bancassurers for you...

Mike,

I wonder if this forum will still be here in nine years time. It would be very interesting to look back on this discussion when reality is known.

Allan

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I wonder if this forum will still be here in nine years time. It would be very interesting to look back on this discussion when reality is known

As interesting as looking back over the last 9 years perhaps?

A period which does include an apparent mixture of good and dreadful times depending on the media you peruse which, I'll tell you now, is and will be the same for pretty much any 9 year period you could come up with.

Just for information purposes and referring back to the original topic for the moment, bearing in mind past performance doesn't reflect the future etc. and once again this in no way should be taken as advice, a 3 way even split between sector AVERAGE UK PENSION Property funds, UK Equity funds and UK Corporate Bond funds (if hedging your bets in 1997 between the big 3 sectors)would have provided a 99% return over the last 9 years as at 2nd June (before costs, which in a Stakeholder are typically 1% pa, 1.5% max.) If that helps any.

9 years a go, private sector defined benefit pension schemes were fatally poisoned when the 5 billion a year was removed from them

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9 years a go, private sector defined benefit pension schemes were fatally poisoned when the 5 billion a year was removed from them

Youre right of course. The Government giveths and the Government mugs you.

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Just for information purposes and referring back to the original topic for the moment, bearing in mind past performance doesn't reflect the future etc. and once again this in no way should be taken as advice, a 3 way even split between sector AVERAGE UK PENSION Property funds, UK Equity funds and UK Corporate Bond funds (if hedging your bets in 1997 between the big 3 sectors)would have provided a 99% return over the last 9 years as at 2nd June (before costs, which in a Stakeholder are typically 1% pa, 1.5% max.) If that helps any.

Jamie,

How have endowment policies performed in that same period? Similar or worse would you say?

Allan

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How have endowment policies performed in that same period? Similar or worse would you say?

Allan, depends on the fund you're in. Unfortunately it's not as simple as how have endowments performed. An endowment is a term given to an investment product that happens to include life cover. A bit like Amplifier or CD Player in our world. It's how the amp or CD Player is constructed that determines performance and reliability.

Ignoring charges and tax etc for the moment, the same average life funds in the same sectors as the pension equivalents will have similar performance before costs and tax, whether they're wrapped in pensions, endowments, insurance bonds etc. However, most people seem to have ended up investing in With Profits funds through their endowments and performance is not so transparent due to the 'smoothing' nature of these funds. This is as opposed to 'unit linked' policies where you get what it's worth on the day. However, just today I have seen someone with an 11 year old With Profit policy that's 90% up on their lump sum investment and their other 9 year old investment that's 58% up. Trouble is of course, you personally have an additional factor to consider in that you're saving on a regular monthly basis as opposed to a lump sum, which means sometiumes you're buying in at higher or lower prices, depending on market conditions. So you end up with an average. All very complicated, I'm sorry.

In general though, with most investments time is your friend. You will get relatively good and bad times and few spot on average ones. If you project forward from a high point (as opposed to an average point) at an 'average' rate, your projection will look great. If you project forward from a low point at an average rate, it won't. Simple as. I have yet to see a full term endowment pay less than the sums invested. Trouble is, if your expected growth rate isn't matched, then clearly you won't make as much as you expected (equivalent to your mortgage for instance). But how do you know until it's finished? You don't, so cautious investors should assume lower, conservative growth rates that are easier to hit, but as that means saving more each month, it rarely happens. Especially as I know that many people took endowment mortgages during periods of high interest rates, when the comparative cost of an endowment linked mortgage, assuming a 7 or 8% growth rate was far lower than a similar repayment mortgage monthly outlay, so the last thing people wanted to do was spend more, because they'd plumped for an endowment 'cos it was cheaper each month in the first place. Not many people equate lower interest rates with lower investment returns so although when the mortgage cost goes down, you should save/invest the balance rather than spend it, it rarely happens. It's possible that Estate Agency/Bank sales people did endowment mortgages a lot on the basis of lower outlay, but I have no firm data to support that or why of course but I'm confidant that as interest rates rose, so did investemnt linked mortgages...

Mike - OK - probably - however my ex employer started to get even more mealy mouthed with the pension scheme after Gordon's dip into the pension funds which I believe was reccomended by the Arthur Andersen accountancy and consulting company famed for the advice to Maggie T re DeLorean cars and Enron.

It took a holiday for many years and also used the surplus to help set up the defined contribution scheme.

It also used the profits of the scheme to inflate the company results so as to max the bonuses for the top boys. Even though the company cannot use the profits back in the company.

It rejigged the post retirement increases only a couple of months ago. (Not in our interest)

Just to think that 20 years ago we were promised one of the best pensions in the land, which is why our pay was not so great, now we have a pension scheme rated in the worst 10% in the land.

Bloody hell, you can't say that, are you a Marxist economist or sumfink?

One thing I don't understand about IFA's.

If they think their advice is so good, why don't they get a percentage over time, so the better the investment performs, the more we both make out of it? IE money where mouth is.

AFAICT, it is in the interest of the IFA to sell me whichever product pays the highest commission, which then reduces the pot of money to be invested.

I guess a "share of the profits" would make it hard for an IFA to get into the game, as there would be some lean years before the money started to role in. Of course, if the advice was crap, the money wouldn't role in, anyway.

cheers, Martin