Pension Advice needed please

themacdaddy

Hi All,

My mam works for herself and has a pension with Irish Life which has (like all others invested in shares) taken a large hit over the last year.

Naturally she is very worried as she feels she is throwing her money away.
I have told her that it may/should bounce back after they old global downturn and confidence returns.

I was hoping someone could give me advice on any good pension products.
Also are there ones out there which don't invest in shares or at least have limited share investments?

Sorry I know very little about pension products or even where to look.

Thanks

A good starting point would be to review her existing policy.

What fund/s is she currently invested in?
What other funds are available to her for investment?
What percentage of the fund/s are invested in equities?
What sectors and countries are the funds invested in?
What charges apply to the contract?
Can she switch funds or redirect future contributions without penalty?


Most of this information should be in the policy document. When she has all this information she may be in a better position to make a more informed decision as to what action she should take.

The 'best' pension product is the one that offers her the lowest charges, greatest flexibility, is suitable to her circumstances and risk profile, and is going to 'perform' better than an alternative.

She can't predict which one is going to outperform but she can control the other features

stepbar

Deleted User wrote: »

A good starting point would be to review her existing policy.

What fund/s is she currently invested in?
What other funds are available to her for investment?
What percentage of the fund/s are invested in equities?
What sectors and countries are the funds invested in?
What charges apply to the contract?
Can she switch funds or redirect future contributions without penalty?


Most of this information should be in the policy document. When she has all this information she may be in a better position to make a more informed decision as to what action she should take.

The 'best' pension product is the one that offers her the lowest charges, greatest flexibility, is suitable to her circumstances and risk profile, and is going to 'perform' better than an alternative.

She can't predict which one is going to outperform but she can control the other features

To add to this one must remember that she effectively gets a part of her pension contribution for free (abeit taxed at a later date). If your mother continues her pension, one could argue that she is purchasing units now at the bottom. The idea is that over a 40 yr period (for example) the gains / losses should average out (hopefully) resulting in year on year growth over the 40 years (all very good in theory as people are discovering now).

kaiser sauze

stepbar wrote: »

To add to this one must remember that she effectively gets a part of her pension contribution for free (abeit taxed at a later date). If your mother continues her pension, one could argue that she is purchasing units now at the bottom. The idea is that over a 40 yr period (for example) the gains / losses should average out (hopefully) resulting in year on year growth over the 40 years (all very good in theory as people are discovering now).

It is quite likely that a forty year timeframe is not available here.

themacdaddy

She is meeting her pension adviser today but he told her to go with the Irish Life one before so I doubt he is going to overly criticise its performance. I know she works pretty hard for what she has and I just don't want her throwing it away. Thanks for all your help.

Drumpot

themacdaddy wrote: »

She is meeting her pension adviser today but he told her to go with the Irish Life one before so I doubt he is going to overly criticise its performance. I know she works pretty hard for what she has and I just don't want her throwing it away. Thanks for all your help.

Most assurance companies have similar charging structures and invest in similar funds.

I was at a seminar for one and they said "we arent boasting but we had the best fund in its range last year, it only lost 30%". Obviously it was a joke of sorts, but its the reality of the way markets are today.

I have had many clients onto me asking what they should do with their pension. The very same sort of queries

"I dont want to throw money away" . ..
"When I look at the news I really worry about my pension" . . .
"What should I invest in" . . .
"Why dont I just put this money into a bank or deposit account" . .

Well the truth of it is, if you are over 55, you should already of been moving your funds slowly into Cash and Gilts based funds. Pensions are all about the long term performance and people are naturally going to get worried in tough times . .

I always use the example of a bank account. If I put €100 into my bank account as savings, I would only have to put €59 into my pension for the same savings. The differance is that my pension is a long term savings policy with specified terms and conditions, whereby I cannot touch the money until I am retiring (as a general rule of thumb).

At the very least, continue your pension payments (what you can afford) and change your future contributions to be invested in cash (this is like putting it in a deposit fund). You may only make 2%-3% but it should not go down and you wouldnt have to worry about the current stocks and shares issues. To people that choose this, they should simply just be happy with their 41% that they wouldnt of had, if they invested elsewhere . .

stepbar

I hate to sh1t on your party because it infuriates me when advisers use that example. I shouldn't have to tell you that a pension is not the same as Savings (I hope....). Customer are led to believe they are and when the value goes below what's put in then the complaints come.

coffee_cake

themacdaddy wrote: »

I was hoping someone could give me advice on any good pension products.
Also are there ones out there which don't invest in shares or at least have limited share investments?

Sorry I know very little about pension products or even where to look.

Thanks

If she's over, say, 50 or so, maybe 55, she should have been slowly moving a large portion of her pension into a more cash/bonds mix which are safer (and therefore will give lower returns over the long term). If she's still got a while to go she's better off leaving it in equities etc. Irish Life generally advise on this kind of thing and advise customers approaching retirement to do this cash/bonds mix, or they do it themselves, not sure which.
If she moves to a safer option now she might see herself with it never really recovering while eqs bounce back up later on.

Drumpot

stepbar wrote: »

I hate to sh1t on your party because it infuriates me when advisers use that example. I shouldn't have to tell you that a pension is not the same as Savings (I hope....). Customer are led to believe they are and when the value goes below what's put in then the complaints come.

I hate when people judge "Advisors" all the same and use their prejudice against the industry to justify a populist opinion (that all advisers simply advise to suit themselves not the client), thats difficult for advisers to defend on a web forum.

A Pension is a long term savings policy . . . .

You get tax relief you dont get with a deposit account . .

You cant touch it until retirement or certain circumstances . .

I dont see why these are innacurate or misleading . .


OP is worried Mother is "throwing her well earned money away" on a Pension. Without knowing all her details and from what little I have read, I suggest that she could always continue investing in her pension and switch her fund to a Pension Cash fund and just accept small gains, but be happy with her tax relief . . . Its not necessarily the most advisable option, as bluewolf said she could miss the expected eventual rebound in the markets, but if somebody is extremely worried about the state of their pension, on a daily basis they should consider my suggestion regarding cash fund . .

Theres nothing wrong with anybody not liking financial advisers or Pensions. But there is something a little hallow when somebody simply questions a persons motives on why they advise something, without actually expanding on their views or offering a good alternative . .

What do you suggest the OP's mother should do . . . . .

stepbar

Drumpot wrote: »

I hate when people judge "Advisors" all the same and use their prejudice against the industry to justify a populist opinion (that all advisers simply advise to suit themselves not the client), thats difficult for advisers to defend on a web forum.

A Pension is a long term savings policy . . . .

You get tax relief you dont get with a deposit account . .

You cant touch it until retirement or certain circumstances . .

I dont see why these are innacurate or misleading . .


OP is worried Mother is "throwing her well earned money away" on a Pension. Without knowing all her details and from what little I have read, I suggest that she could always continue investing in her pension and switch her fund to a Pension Cash fund and just accept small gains, but be happy with her tax relief . . . Its not necessarily the most advisable option, as bluewolf said she could miss the expected eventual rebound in the markets, but if somebody is extremely worried about the state of their pension, on a daily basis they should consider my suggestion regarding cash fund . .

Theres nothing wrong with anybody not liking financial advisers or Pensions. But there is something a little hallow when somebody simply questions a persons motives on why they advise something, without actually expanding on their views or offering a good alternative . .

What do you suggest the OP's mother should do . . . . .

Look, I have seen some dodgy practices in my time and seen products being sold on the premise that a pension is somesort of glorified all singing all dancing "long term savings" plan. It's not the first time I heard an advisor use this term. It's a load of bollox. You know it and I know it. Ask any person on the street to give you their first thought if you said the words "Long term savings plan" - I can guarentee you they would say confuse it with some sort of deposit account where by the "assumption" is made that capital is protected.

At least call it what it is - a mechanism for providing a regular income at retirement. We're talking about a product that a customer is going to fund for up to 40 years not the purchase of a litre of milk. I wish advisors would stop calling a pension some sort of savings plan and using little annodotes in an attempt to dumb down products / make a sale. It's misleading full stop.

I hate when people judge "Advisors" all the same and use their prejudice against the industry to justify a populist opinion (that all advisers simply advise to suit themselves not the client), thats difficult for advisers to defend on a web forum

Hold on there. This is not about populist opinion. It's about using the correct terms for the products one is selling. Attempting to sell a pension as "a long term savings plan" is simply misleading.

BTW I say this as a banker who has sold pensions (in addition to other products) in the past. I'd dare not use such flippant terms.

If pensions were sold in the correct fashion the OP wouldn't need to be asking questions (on behalf of his mother) about whether his mum should retain her pension or not. The risks would be fully understood.

/Rant Over

Drumpot

stepbar wrote: »

Look, I have seen some dodgy practices in my time and seen products being sold on the premise that a pension is somesort of glorified all singing all dancing "long term savings" plan. It's not the first time I heard an advisor use this term. It's a load of bollox. You know it and I know it. Ask any person on the street to give you their first thought if you said the words "Long term savings plan" - I can guarentee you they would say confuse it with some sort of deposit account where by the "assumption" is made that capital is protected.

At least call it what it is - a mechanism for providing a regular income at retirement. We're talking about a product that a customer is going to fund for up to 40 years not the purchase of a litre of milk. I wish advisors would stop calling a pension some sort of savings plan and using little annodotes in an attempt to dumb down products / make a sale. It's misleading full stop.



Hold on there. This is not about populist opinion. It's about using the correct terms for the products one is selling. Attempting to sell a pension as "a long term savings plan" is simply misleading.

BTW I say this as a banker who has sold pensions (in addition to other products) in the past. I'd dare not use such flippant terms.

If pensions were sold in the correct fashion the OP wouldn't need to be asking questions (on behalf of his mother) about whether his mum should retain her pension or not. The risks would be fully understood.

/Rant Over

Way to answer my questions and totally sidestep what I have said. . . So, because you feel that most advisors dont explain pensions means that they are bad savings products . . . . .

Explain to us all what a "long term savings plan" is , if its not a pension . .

Im not selling anything here . . Why do you say that . . . And I missold, or mis advised on what a pension is because . . . eh . . Eh ..

Most importantly you advise the client to . . . . . .

Like I said, if you are going to rant as you admit you are, at least have something constructive to add to the arguement . .

I dont work in the bank, so I cant comment on your "all dancing, all singing" comment on pensions. Perhaps thats what they did in the banks when you were (mis)selling some products to clients you were able to take advantage of, but some of us actually explain the in's and out's of policys we sell or advise on. . .

Never read posts by somebody , so confident of their opinions without being unable to actually qualify their points with remotely decent facts (or alternatives) .

Im not saying a Pension is "the perfect policy", but its advantages cannot simply be ignored because you feel its usually missold . .

I dont have a problem with anybody dissing pensions or advisors, but at least have some alternative to add credibility to your prejudice . .

Once again, to keep this discussion simple -

- What do you advise the client to do as an alternative to putting money into a pension . . .

Toots

OK, lets chill out a bit here, and advise the OP without resorting to arguments and accusations. If you wish to debate the selling methods used by pensions advisors, please do so via PM.

kaiser sauze

stepbar wrote: »

I hate to sh1t on your party because it infuriates me when advisers use that example. I shouldn't have to tell you that a pension is not the same as Savings (I hope....). Customer are led to believe they are and when the value goes below what's put in then the complaints come.

They differ, but only in the method that they are salted away.

It infuriates me when people get pernickety about a concept they clearly fail to understand.

His example is a valid one.