Clarity of Pension advice. . . . . . .

I have had numerous meetings with people locally who have contacted me because they had an experience with a door to door Pension salesman from a specified Pension provider. Some of the following are quotes used by people I have met:

• “This salesperson does not listen to what we were saying and only wanted to discuss specific things that were encouraging us to take out a policy”

• “I found this salesperson very pushy. They stated that their Pension company had the best investment funds and the cheapest charges in the industry”

Charges

A Pension policy where there are significantly high up front charges in the first few years are not always the cheapest or cost effective in the long run. In many cases there are certain bonus’s linked to these plans, but many people might not meet the criteria to benefit from these bonus’s that can distort the quote you receive.

I have sat down with several people who had been contributing to this Pension plan and after a couple of years are shocked with the value. There was one client who was shocked to learn that it stated on his Pension statement that these savage early charges would also apply to any potential increase he makes to his pension in the future.

Fund Performance

On any given month, many of the top Pension providers can say that they have one/some of the best funds in a specified field. This does not make them the best Fund manager in the market. For example a company may have a fund that did well from a specified timeframe (exactly 5 years) right now, but another company may have better fund performance figures over a 10/15/20 year period.

Confidence in saving for your Pension

If you are not fully confident or convinced by what a salesperson is saying then you should always consider getting a second opinion. A person who can only sell a pension , investment or Life assurance plan from the one company is only able to discuss these products in how their company has instructed. Different Pension providers have different charges and most of them nowadays do not do up front charges because many people might have to stop and start Pension payments as their situation changes.

Not sure? Give me a call . . . .

If you are not sure of what you are being sold or told, please do not hesitate to contact me.

What happened to my Pension savings when I moved Jobs?

If you or your partner were contributing to a Pension arrangement in a job that you have since left, then you may have Pension savings sitting paid up in your former Employer’s Pension scheme. Indeed the same may be the case if your employer was contributing to a Pension Plan on your behalf while you were working in that company.

When people change employment, many people do not think about personally taking control or moving the Pension fund that they had built up during the years working in this company. You are entitled to what is called “leaving service options” when you leave employment. These are a list of options of what you can do with your Pension Fund now that you are leaving.

In many cases one of the options is that you do not have to move the Pension savings and they can remain in this company Pension plan until you are at retirement age, at which stage you can drawdown your entitlements. But it is worth considering another option that you may be entitled to take. This option allows you to move your Pension savings from the company Pension plan to a Pension arrangement in your own name.

The main benefit to moving from a Company Pension arrangement into a Pension arrangement in your own name would be:

• All Correspondence is sent directly to you as opposed to the trustee whom in many cases is your previous employer

• You are in complete control over your Pension and do not require signoff from a third party (trustee) when you wish to move it or draw down your entitlements

• It can be easier and quicker to get information on your Pension(s) which also makes it easier to keep tabs on exactly how many Pensions you have and where they are.

Some people like to put all their Pensions into one Pension plan. While it has its advantages, it is worth noting that in some cases it can be beneficial to keep some Pension plans separate. A big reason would be if at retirement, you have only one big Pension plan, you must take your full retirement options. If you have several Pension arrangements you can draw your retirement options down at different times if it is more convenient.

Jims Story… Conclusion. October 2013

In the previous two blogs we discussed Jims Life Assurance and Serious Illness cover. Jim had originally only contacted me to review his Mortgage Protection cover, but since realised that he could properly review other areas of his finances that he had avoided for so long.

Jim had worked in several different companies over the years and didn’t really keep a track of his Pension arrangements that he had built up. The mere thought of chasing up information from different companies (even remembering which company might have one of his Pensions) wrecked Jim’s head. Who would he contact? Was there still a Pension there? Where was the Pension invested? What could he actually do with these funds, if anything?

I sat down with Jim and helped him put together some steps to help us find his Pensions. Once we had all the different Pension information on hand it was easier to advise Jim what exactly he was able to do with each Pension.

In some instances he was better off leaving his Pension where it was (Defined Benefit arrangement). In another instance he found it preferable to move the Pension arrangement into his own policy in his own name.

When moving his existing Pensions into alternative arrangements, I made sure that Jim notified the Pension Provider of all important information. Sometimes specified information is not clarified for one reason or another and it can have huge ramifications for a person at retirement, particularly in relation to their Tax free lump sum entitlement.

When we had finished the exercise Jim knew exactly what he had in all Pension arrangements and had an idea of what he might expect at retirement. He was delighted that he now had a simple way of tracking his Pension investments.

Jim's Story continues...September 2013

Jims Story. . Continued. .

So let’s recap…. Jim has Mortgage protection cover for himself and his partner that he took out years ago when he got a mortgage. He has had two children since he last looked at his family’s financial protection. His mind was focused on reviewing his cover when a work colleague gets ill and he decides to review his family’s protection.

After discussing and reviewing Jim’s personal circumstances, we were able to discuss how much Life and Serious Illness cover Jim should consider. He had a tight budget so we were limited in how much cover we could setup. We first worked out how much cover Jim would ideally like to have and then we started to try and fit this cover into his budget.

Ideally, Jim wanted to have this cover for at least 20 years, so that his children would be adults (not so dependent on Jim) by the time the cover ceases. He also wanted to have the same amount of Life and Serious Illness cover to protect his family if he died or was struck down with a serious Illness.

The term of the plan affects the cost of the cover. In Jim’s case, he wanted to keep as much cover as possible at the start, so we reduced his cover term from 20 years, to 10 years. But we chose an option on the policy that gave him the option to extend the term of the plan if he wanted to, during the 10 year life of the plan.

Life cover is cheaper than Serious Illness cover, so we were able to keep the amount of Life cover that Jim wanted. The premium was still a bit higher than Jim had originally budgeted so Jim had two options. He could either reduce his serious illness cover a bit or increase his budget to match the cover he wanted.

I also discussed the same kind of cover with Jim’s wife, Clarice, who looked after the children while Jim was at work. Neither of the couple had factored in the cost to the family (childcare) if something was to happen to Clarice.

In the end, Jim and his wife had an understanding of where their family would be, financially, if either of them died, or if either of them suffered a specified serious Illness. Since we had spent time going through the different aspects of the cover, both had a much greater understanding of the cost and more importantly the value of the cover.

They were both so happy with the outcome of our meeting, they asked would I come back and help them find and review some Pension plans they had from different employment throughout the years. That is a story for another day . . .

Jim's Story....August 2013

Jim’s story . . .

Jim took out a Mortgage Protection policy with his wife when they took out his mortgage. At the time, Jim only took the cover out because it was a requirement from the bank for him to get their mortgage approved. He wasn’t even sure exactly what cover it provided himself and his wife.

Jim wants to review his existing cover because one of his work colleagues has battled with cancer and it focused his mind on his own circumstances. We sat down and discussed his existing Mortgage Protection cover to make sure that he understood where his family would be financially in the event of the death of either partner. In short, the Mortgage protection policy would cover most (if not all) of the outstanding mortgage.

Since Jim took out this Life cover he had welcomed 2 children into his family. It hadn’t occurred to Jim how this important change in family circumstances might require having a look at the level of cover he was providing for his family until his work colleague got very sick.

As it stood, if Jim or his partner died, they would own their house. Great, so the family owns the house, but what now? If Jim dies, his partner will either have to quit work to look after the children or possibly pay somebody to look after them.  What are the costs in doing either of these things? Where do they get the money to be able to afford the time with the children or the cost of childcare?

If Jim dies, he is the main income earner, but who looks after the children? How much will it cost? What if Jim wants to take time out to bereave the death of his partner (and spend more time with his children during this tough transitional period)? Can he afford to do this?

Jim hates the thought of even considering life without his partner and his partner does not like to think of how the family would struggle financially without Jim. However, they both accept that one way or another, if one of them died, the family would not only lose a loved one, they would be at a financial loss that they needed to acknowledge.

This is a very hard step to take. To try and put a value on a family member or a partner is not particularly something any of us want to think about, after all no amount of money can replace a loved one. Whether a person has younger dependants or is on their own, the loss of a partner will very likely have a financial impact on their lives.

Jim’s story continues next month. .