Written by Richard Smith Financial Expert on 18 January 2010
More Ways To Find Out If You Have a Duff Pension Plan And The Action You Can Take To Solve It.
Over the past couple of weeks (yup I know we have just come past Christmas) I have been speaking to more and NPI Pension Owners. This is good news because many have been sadly lacking in advice for some time.
I have produced a list of Poor Pension Providers and these are here. Please fee free to look around the list and contact me should you wish to discuss (informally) any of them.
Abbey Life Pensions/Pension Planning Risk Profile/Investment Funds
For those of you that do not know me, I am a Pensions Expert, with a particular dislike of some of the poorer pension providers in the market place. My Abbey Life Pension Pages are here. And there is an option to find out some further information on this page.
This brief summary is an outline of one of the really big pitfalls and where most Financial Experts/Banks and Building Society Experts get it V E R Y wrong. Just look at what some Financial Experts have been saying on one of their own forums.(Please note this is an external link)
Asset Allocation Rule – Don’t put all of your (investment)Eggs in one basket(or managed fund).
One of the vitally important parts of any Investment Planning (and this includes Pensions) is the correct Asset Allocation.
An explanation is below.
“The process of dividing investments among different kinds of assets, such as stocks, government bonds, property and cash, to optimize the risk/reward trade off based on an individual’s or specific situation and goals. A key concept in financial planning and money management” explained by Investor Words.com
Now even with some of the poorer Pensions Providers in the market place there is a range of available investment funds, however the quality of the advice received initially is often limited and usually there is only one fund chosen. For many of you with these Pension Plans (see list) Have a look at your own Pension Statement, one or two funds within the fund could indicate a poor deal indeed.
Your Provider may not have a range of funds that are remotely usable and this is often the case.
Which of course means that the Asset Allocation rule cannot be used correctly in any instance.
Lets consider the reasons behind this rule – Investment Risk.
There is no right or wrong level of risk; it is just personal preference. An acceptable level of risk to you may be unacceptable to others. As a rule of thumb, the higher the potential returns the higher the risk.
Your attitude to risk may change throughout your life and you should review your investments as this happens.
There are five main types of investment risk are:
Market risk – the risk that market-linked investments lose value when markets fall
Interest rate risk – the risk that investments will lose value when interest rates rise
Inflation risk – the risk that your investment will not keep pace with the cost of living
Credit risk – the risk that the provider may not be able to meet their obligations
Currency risk – the risk that your investment may be affected by changes in exchange rates. The level of investment risk your money is subject to increases if either, you invest in a single type of share, a limited geographical area or a specific part of the economy.
When I am making Pension Investment recommendations the above rules are used as part of the decision making process.
So how does this fit in with your current Pension Plan.
Has your Expert provided you with a range of funds to invest in?
Does your Pension provider even have a range of suitable funds to invest in (not forgetting issues like charges and administration standards)?
If you do have a range of invested funds when was the last time these were reviewed?
I fully understand that you would like some further informatin which is why I have produced a free report and outlining some of the issues here.
Please contact me when you require some further advise, or consider downloading our Pensions Review document, a free report outlining the important points.
Richard Smith
0845 226 9106
Similar Links
Abbey Life Pension Review
Free Pension Review
High Charge Pensions
Tags: Abbey Life, Colonial Mutual Pension, Home Buyers Guide, Investment Planning, Investment Returns, NPI Pension, Pearl Assurance, Pension Transfers, Poor Investments, State Pension, Windsor Life, With Profit Bonds
Posted in Abbey Life, Equitable Life, NPI News | Comments Off
Written by Richard Smith Financial Expert on 05 January 2010
It is quite amazing to me that the regulator, the Financial Services Authority, has allowed the biggest single sector of the UK investment market to end up in a big mess mess.
When considering With-Profits investments, and finding the correct advice via an Investment Expert both as a concept and in reality, should be simple, however is often completely fudged by providers (Life Assurance Companies).
Despite the obligation for With-Profits providers to publish a PPFM (Principles and Practices of Financial Management) it is still often impossible to uncover all the relevant facts and figures. The PPFM documents themselves are often crammed with impassable terminology and detail and, like With-Profits in general, appear designed to make things as unclear as possible. It is also interesting to note that many Investment Experts also still get it very wrong.
The approach of many With-Profits companies with regard to transparency is often nothing short of appalling, and is in direct conflict with the FSA’s “Treating Customers Fairly” initiative.
It is hard to believe that in the modern investment world With-Profits still plays such a large part. It is clear that the concept of With-Profits has been mis-sold, allowing Insurance Companies and their sales people to present With-Profits as something it is not (not all ’s are wholly innocent either). With-Profits has undoubtedly regularly been sold as a direct alternative to deposit accounts.
There remains somewhere in the region of £300 billion invested in With-Profits, many are trapped by redemption penalties (often called, MVR’s, MVA’s etc.) but the funds themselves continue to deliver appalling results.
However, a small minority of providers (Step forward – Prudential, Aviva, LV= and Wesleyan) have achieved positive and very acceptable results for their plan holders. These companies aren’t rocket scientists, they simply applied the original principles and benefits of with-profits, not chasing market trends and fashions, and investors with these companies are likely to be pleased with the results. Although there are another few companies who have achieved, at best, reasonable returns, somewhere in the region of 40% of all With-Profits investors are in funds that are doomed to underperform substantially in the future.
One of the many contradictions for With-Profit investors is that those in good plans with good companies, achieving good results, are likely to be in a position where redemption penalties (MVR’s, MVA’s, or some other element of the With-Profiits alphabet soup) do not apply, and they can move out of the fund quite easily. Sadly, this is another opportunity for the unscrupulous sales person to lump all With-profits funds under the same umbrella. In a nutshell, the poor funds usually have the highest penalties, the good funds often have no (or very low) penalties.
Yet another contradiction is that the good funds, with the best results, are usually those that have the highest asset allocations in shares and property which, ironically, makes them more vulnerable to market downturns and less suitable for the cautious investor that they are aimed at. Help !
If you have a With-Profits based investment, or are considering investing in one, take advice now and of course I will be pleased to help.
The reality is these investments are often not what they seem and there are a lot of lazy Financial Experts out there that continue to use what in the modern world is clearly a little out of date.
Over here I pride myself on making sure that all investments fit completely with your overall Risk Profile and use an Independent System (that has been tested) in order to ensure my recommendations fit.
Richard Smith
0845 226 9106
You can contact me here
Related Links are below.
Abbey Life – Poor Pension Providers
Poor Pension Providers – Free Review
With Profits – Investment Experts
Tags: Abbey Life Pension, Investments, Pearl Assurance, Pension Transfers, Scottish Provident, With Profit Investments
Posted in Equitable Life, General Financial News, Investments, Pearl Pension | Comments Off
