Jump to content
Complete France Forum

Stakeholder Managed Pension Fund


Joshua

Recommended Posts

Hi,

Can anyone advise me whether there is a requirement on the part of the Fund Managers to move a fund into a lower risk  "Lifesyle option" fund when you are within 5 years of  your indicated retiring.

I put the question to the Fund Managers after reading a mention of this in a FSA booklet and they have been very vague saying I didn't request them to do it

Regards Joshua

.

 

Link to comment
Share on other sites

[quote user="Joshua"]Hi,

Can anyone advise me whether there is a requirement on the part of the Fund Managers to move a fund into a lower risk  "Lifesyle option" fund when you are within 5 years of  your indicated retiring.

I put the question to the Fund Managers after reading a mention of this in a FSA booklet and they have been very vague saying I didn't request them to do it

Regards Joshua

.

 

[/quote]

Hi,

     Having just read up on these pensions , it seems to me that in general, fund holders have a range of funds with varying risk "profiles" and that they must advise clients on the implications of these risks when they select their initial funds . They usually advise clients to review their risk (downwards ) as they approach retirement, but this has to be initiated by the client.

   Some companies (eg HSBC) have a so-called "Life-style " fund which saves clients having to actively manage their risk by automatically moving funds progressively into lower risk products as time goes by. As far as I can see you have to choose to invest into the "Lifestyle" fund either at the start of the contract or at some later date before the automatic adjustments can start. There does not seem to be any mechanism whereby the managers are required to move your funds , without your asking them , from one of their general funds into the "Lifestyle" fund.

    As I say, I have no personal experience of these products and stand to be corrected by anyone who has had a different experience.

Link to comment
Share on other sites

Thanks Parsnips,

It was probably wishful thinking on my part that the FSA "Moneymadeclear" booklet said "Must" rather than "should or could" to applying Lifestyle protection.

I'll try to find the reference to it on their website.

What makes it worse is that we started the fund many moons ago with Shabby National and they sold it on, and then on and on to subsequent Fund Managers.

One of which lost us 28% of the value of the fund, prior to the financial meltdown, in just under a year.

Thanks again, Joshua

Link to comment
Share on other sites

I think for majority of average Joe's whose fund is 'hands off' the provider has a duty to manage it appropriately which means moving into defensive less risky investments, usually cash based, in the final years of the plan.

When you took out the plan you would have been asked to state a retirement date which is what the company should use to determine when to adopt the defensive strategy.

If on the other hand you have a SIPP then it will be up to you to tell them what you want them to do with your fund.

Link to comment
Share on other sites

I may be a little out of touch, as it is now well over a year since I retired as an IFA, but I don't believe that has ever been an onus on a product provider (insurance company or bank) to reduce exposure to risk in the latter years of a pension plan, unless a "lifestyle" option has been selected.

A fund manager will have an obligation to manage a particular investment or pension fund within certain risk parameters, so from time to time, he may invest more defensively or aggressively on behalf of all of his investors.  It is the responsibility of the financial adviser (e.g. IFA or bank adviser), or the client himself, to ensure that he (the client) is invested in the correct type of fund to reflect (amongst other things) the stage of his working life and his acceptance of exposure to risk.

A good working relationship with a financial adviser is literally worth its weight in gold, particularly in difficult times as we have seen in recent years and also in the run up to retirement.  Goodness knows, I spent many years firefighting the results of this common misunderstanding on behalf of clients, who believed that their interests were genuinely being looked after by their investment or pension provider.

Link to comment
Share on other sites

I bow to your previous professional experience however may I point you to THIS article which specifically mentions funds being switched to less risky investments in later years. As I say, it's the reason for stating ones intended retirement age at the outset.

Whilst it's easy to change and opt for adifferent retirement age or lifestyle strategy it's a tragic fact that millions sign up to pension plans and then file them under 'job done' never to see the light of day again until retirement looms, in my experience very few seem take an active interest or role in them.

The article is dated 2006 however I don't think anything significant has changed since then, possibly in field of new business but not for existing legacy policies.

Link to comment
Share on other sites

I agree totally with what you say in your second paragraph, but I also think that the article pretty much confirms what I was trying to say..........providers of personal pension plans will do nothing unless a lifestyle option has been selected.  The nomination of a retirement date on its own will trigger claim documentation near the magic date, but there will be no active management of an individual plan before that time in the absence of a specific request for a lifestyler-type arrangement.    

If someone contacts his or her pension company to let them know that retirement is planned at particular age, one would hope that the lifestyler options would be explained and offered at that time.  However, many (in particular "direct") product providers only give out information on the features of their plans and make it clear that they do not offer advice specific to the enquirer.........they simply cannot afford to do so.

The stakeholder pension that the original post referred to was a low-cost personal pension plan forced on the financial services industry by the present UK government[6], with the noble motive of looking to give the investor better value for money through strictly controlled maximum charges.....good for votes, as well!    The sad fact is that these plans are not cost-effective for the industry (providers or advisers) to market or service without levying additional fees direct to the client.  Relatively few clients are willing to pay for the advice, so, rather than solving a problem, the culture of neglect and "head in the sand" approach has been exacerbated.

Link to comment
Share on other sites

Hi Joshua

Frexpt has it exactly right.  Stakeholder pensions were intended to be simpler and lower cost compared to previous styles of personal pension plans: typically they can be invested in the internally managed funds of the provider and/or in a limited range of funds managed by outside providers (at a higher cost but with the chance of better returns).

If your pension is invested in the Managed Fund of one of the larger UK providers it will have taken a beating in late 2007 and through 2008.  2009 has proved to be a better year so you will see some recovery in your plan's value this year but here's the rub:   Lifestyle options (which typically move away from equities and more towards cash and index linked gilt funds in order to reduce risk) forgo exposure to market recovery.  In short, if you are close to taking your pension benefits you might well be better off by not being in a Lifestyle plan at this moment as the market has recovered from a 2-3 year low of something like 3300 to today's high around 5700.

Generally you can make fund switch changes to your plan without any cost, and in some cases as frequently as you wish.  I'm not an IFA but my view would be we've probably seen as much growth as we're likely to get so I'd be looking to lock in any growth the plan has made over the last six months.  A good IFA will easily be able to advise you on how to optimise your pension plan.

All the best

Tony

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...