Pension companies switching plans

[earthman]

I got a letter from Scottish Widows today, reminding me of the 'pension investment approach' which is apparently applicable for my bog standard I pay a bit/employer pays a bit plan, the letter says that they will automatically switch to that unless I send a written request not to do so by next month.

It states that the switching reduces the growth potential of the policy, although it also aims to protect it's value as I near retirement, in my case around 15 years time.

What should I do, stay on whatever 'plan' I've been on since I joined the scheme a couple of years ago or let them switch?

 

[Rocketman]

Depends on the risk you are willing to take. Personally I think 15 years is a bit long to protect an investment, I would look at more like 7 years max.

 

[Pigeon_Droppings2]

Speak to a financial advisor....far too important a decision to get wrong!

 

[minimutly]

I'm retiring in 5 to 7 years time, and I wouldn't change mine to the safe scheme yet. Ok it's safer, but the boogas are taking "units" out of the fund to "manage" it, so it will grow even less. Markets to and fro, it's all a gamble though. Ultimately a risk/gain decision, and yours.

 

[earthman]

Depends on the risk you are willing to take. Personally I think 15 years is a bit long to protect an investment, I would look at more like 7 years max.

Should I write that letter telling them not to switch then?

I don't hold much hope for this pension in the long run to be honest, even after 17 years of payments, it's only going to be a little bit extra on top of the State pension I bet.

 

[earthman]

Speak to a financial advisor....far too important a decision to get wrong!

Do you know one who's got a crystal ball then? Last time I had dealings with one, he were pretty useless to be honest.

 

[minimutly]

Do you know one who's got a crystal ball then? Last time I had dealings with one, he were pretty useless to be honest.

That's pretty much my view of them too, but he/she should know a bit more about pensions than the average internet forum member.

 

[Pigeon_Droppings2]

The problem is...anyone who actually knows anything is basically restricted from giving any advise....legally only the advisors can give you advice.

So if you did get some advice on here ....it would be someone who doesn't even know that they aren't allowed to give it!

 

[HughF]

It all depends how risk averse you are as to how close to draw down date you want to move the fund into a lower exposure investment stream... Only you can decide on that one.

 

[colnerov]

Hi, The trouble is the first two years worth of payments of any financial product like this is used to build up the capital fund for investment purposes, to pay for the commission for the salesman and other sundry administration costs. It has likely been put in to a higher risk category for better possible initial growth. Fifteen years is not very long to build up a substantial fund. So the choice is potentially higher gains at higher risk or move it into safer territory to protect it, you need professional advice for an informed opinion but will still ultimately be your decision.

Colin

 

[earthman]

It all depends how risk averse you are as to how close to draw down date you want to move the fund into a lower exposure investment stream... Only you can decide on that one.

I'm a belt and braces type of guy, don't gamble or like taking risks.

 

[earthman]

Hi, The trouble is the first two years worth of payments of any financial product like this is used to build up the capital fund for investment purposes, to pay for the commission for the salesman and other sundry administration costs. It has likely been put in to a higher risk category for better possible initial growth. Fifteen years is not very long to build up a substantial fund. So the choice is potentially higher gains at higher risk or move it into safer territory to protect it, you need professional advice for an informed opinion but will still ultimately be your decision.

Colin

Like with any of these pension companies, do even they know what they are doing when it comes to putting the money in pot A or pot B,....I don't trust them but have no idea either.

 

[addjunkie]

Speak to a financial advisor....far too important a decision to get wrong!

This needs an extra words......good and independant.

A good advisor will have you do a risk questionaire, to assist you in deciding how much risk your are prepared to take with your monies. They will also up front tell you any costs or potential costs involved.

Changes are made for a reason, you need to understand what that reason is, this is very important a bad decision can cost huge amounts.

 

[HughF]

Like with any of these pension companies, do even they know what they are doing when it comes to putting the money in pot A or pot B,....I don't trust them but have no idea either.

It's not rocket science, you look at the portfolio brochure for the fund you have your pot invested in and see what the typical spread is. All this info is available from your pension provider.

 

[HughF]

I'm a belt and braces type of guy, don't gamble or like taking risks.

When it comes to growing your pension pot for retirement, you really should be prepared to take the long term approach (speaking as a 35yr old who's been paying into a private pot since my early 20's)... As you approach draw down date you need to reduce the risk exposure of the pot by moving it into a different investment vehicle.

Taking the long term approach means exposing that pot to a certain investment risk but it's the only way to make it grow enough for that comfortable retirement. And nobody wants some sort of £130/week state pension do they?

 

[Rocketman]

Should I write that letter telling them not to switch then?

I don't hold much hope for this pension in the long run to be honest, even after 17 years of payments, it's only going to be a little bit extra on top of the State pension I bet.

Personally I would. The idea of putting the pot into a low risk fund is basically in case of recessions.

So on a higher risk pension fund stock prices can be used as a general guide for recovery, obviously you would have dividends as well. The longest time based on the USA stock market 500 index it has taken for stock prices to fully recover ever is 8 years.

https://fourpillarfreedom.com/heres...has-historically-taken-to-recover-from-drops/

As someone else has said no one has a crystal ball that can tell us for sure. So at the end of the day it has got to be your decision.

 

[earthman]

This needs an extra words......good and independant.

A good advisor will have you do a risk questionaire, to assist you in deciding how much risk your are prepared to take with your monies. They will also up front tell you any costs or potential costs involved.

Changes are made for a reason, you need to understand what that reason is, this is very important a bad decision can cost huge amounts.

Call me cynical but I suspect these changes are more about lining their own pockets at the end of the day.

 

[earthman]

When it comes to growing your pension pot for retirement, you really should be prepared to take the long term approach (speaking as a 35yr old who's been paying into a private pot since my early 20's)... As you approach draw down date you need to reduce the risk exposure of the pot by moving it into a different investment vehicle.

Taking the long term approach means exposing that pot to a certain investment risk but it's the only way to make it grow enough for that comfortable retirement. And nobody wants some sort of £130/week state pension do they?

Personally I left it too late, never earned enough to put X amount in a pension to make it worth while. I never contracted out of serps all those years like most people did so I should get full state pension, not that will mean much I know. I wouldn't have known where to 'invest' that 2k or so back then anyway, just like now.

My only saving grace is that I own my home now, I can go down the equity release route in my old age if need be.

 

[HughF]

Personally I left it too late, never earned enough to put X amount in a pension to make it worth while. I never contracted out of serps all those years like most people did so I should get full state pension, not that will mean much I know. I wouldn't have known where to 'invest' that 2k or so back then anyway, just like now.

My only saving grace is that I own my home now, I can go down the equity release route in my old age if need be.

Yeah, a lot of people do leave it too late - my obnoxious pension adviser said with a serious face 'the correct time to start saving for a pension is when you are born'.... I'm in a lucky position to have very little outgoings and a well paid job so I can save a big chunk away each month.

Best advice my mother ever gave me was 'get your **** down the bank and open a private pension'...

 

[Pigeon_Droppings2]

With interest rates the way they are some of those old defined benefits pensions are worth a tidy sum these days....I sorted out my pension tracing last year. Amazing that my first job which I worked for 2 years decades ago....the pension still existed and was just quietly sitting there with my name next to it...waiting for me to find it!

I think HMRC have a portal to search and find old pensions...some of the old ones are worth big money these days!