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Pension pot

by Oxygenate 13 December 2009 |

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I have a £150,000 pension pot. I want growth rather than income, medium overall risk. Any brilliant suggestions?

I am retired.

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804

MikeGG1 posted
Oxygenate
Any suggestions would have to depend on how long we have. You say that you are retired which narrows down the time frame. We need your approx age and whether you are in or contemplating Income Drawdown (to 75). With that size of pot I wouldn't recommend Alternative Secured Pension from 75.
Mike
Posted on 13 December 2009 | Love 1 love Report
1

Oxygenate posted
I am 64 (will be 65 on 11.03.10); income is not so important until,
say I get into my 70s when, no doubt, medical costs kick in.

Not
even sure what an Alternative Secured Pension is! I am only looking at
Annuities but woud like to take a run at leaving some capital for my
grandchildren.

My alternative appears to be to take a 'medium risk' managed portfolio

Any
Posted on 16 December 2009 | Love 0 loves Report
75

Ed Bowsher posted
Hi Oxygenate,
More questions, I'm afraid. Do you have any other sources of income apart from the state pension? Do you have any other savings? Do you own your home? Do you still have a mortgage on that home?
These are all important questions because they affect how much risk you can take with your pension pot.
If the pension pot is only your only significant asset, then I'd strongly advise you not to take any risk with your money. Keep it in cash, and then buy an annuity when you need the income. You say you might need the money in five years' time, and there's a good chance that the stock market could perform poorly over that relatively short period, so that's why cash is best.
In fact, regardless of the size of your other assets, many people would say that at 65, you should keep your money in cash. In other words, you're too old to risk the stock market.
There are, of course, half-way houses between cash and shares. Gilts and corporate bonds are the obvious ones. However, I'm not convinced they're going to do well over the next five years either. You could also consider guaranteed equity bonds, but these also have flaws. Read this article:
http://www.lovemoney.com/news/savings/avoid-these-scandalous-savings-accounts-3598.aspx
I've no idea what 'medium risk' portfolio has been recommended to you, but it may well be pretty risky. There's been some publicity recently about an investment product that was recommended by Barclays to pensioners. The investment performed poorly and should never have been recommended in the first place by Barclays.
It might be worth visiting an Independent Financial Adviser if you're really not sure what to do. The adviser can then look at your whole financial situation and ascertain how much risk is appropriate for you.
Regards,
Ed Bowsher, lovemoney.com
Posted on 17 December 2009 | Love 0 loves Report
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Oxygenate posted
In answer (feeling honoured to have Mr Bowsher!)
1. I have a pension outside the 'pot' which, with the state pennies from next March, will be sufficient for a few years - until my health decides to go south.
2. I own my own house, no mortgage.
3. I have a few other savings, nothing worth mentioning, and really set aside for emergencies.
4. I have been to see my NatWest financial advisor, who proposed, against a set of a few questions, their medium risk managed funds.
5. Regarding an IFA I have contacted Hargreaves Lansdown despite my misgivings about their excessive bonuses (!)
6. Annuity? Investment? Draw Down?
rgds
Posted on 18 December 2009 | Love 0 loves Report
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iPension posted
Sorry to jump in before Ed replies.
There are still a few more questions that should be considered before you make a decision.
Are you married (with a partner)?, What age are they? Are they in ggod health? What is their asset and income position and how does it interact with yours?
Are (either of) you likely to be inheriting any money in the next few years? How much and possibly when?
Comments on comments made earlier:
ASP is alternatively secured pension and only applies from age 75 and only then as an alternative to buying an annuity. Don't dismiss this offhand as it should be considered at that time if is still an option.
In my opinion putting off buying an annuity for the long term and leaving money in cash is unlikely to be the best option, unless annuity rates increase substantially in the meantime. That will only happen when interest rates rise and they will only rise when inflation increases, which will eat into the value of cash on deposit. If inflation is a worry then market linked investments are a far better protection against inflation if you can live with the volatility. This is a simplistic summary and there are other factors to weigh up as well.
I agree with Ed that seeing an Independent Adviser is a good idea. Look for those who have some sensible commentary on their website about retirement advice and pensions. Avoid those that are jack of all trades master of none (especially mortgages). Also don't be afraid to ask before you meet them how much they will charge for the advice. I don't mean this as a way to beat them down on price, a good adviser will be confident about the amount of work likely to be involved in advising you and you can judge if they are worth this.
The drawback with advice from a bank if they tend to be very sales and target driven. One major bank insists its advisers see 25 people each week and I don't see how they can give the care and attention required to provide proper advice. The case mentioned by Ed with Barclays is one where the bank were just promoting one or two funds from one insurance company and putting all clients and all their assets into the one fund - possibly because they were getting a bonus for doing this.
Steve
Posted on 18 December 2009 | Love 1 love Report
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Ed Bowsher posted
Hi all,
Some good thoughts from Steve. I'd just add on annuities that, of course, Oxygenate will get a higher annuity aged 70 than at 65 because his life expectancy will be lower by that time.

I guess my main point is this: I think there's a decent chance that the stock market won't perform well over the next five years, so it's a risky option for any pensioner. Now that we've heard more from Oxygenate about his circumstances, he could perhaps afford to put some of his pot into the stock market. Ideally, in a UK stock market tracker fund. But there's a real risk he could end up losing money....
If it were me, I'd keep some of the pot in cash.
I'd ignore anything that Natwest has told you. Going to Hargreaves Lansdown makes much more sense.
Regards,
Ed

Posted on 18 December 2009 | Love 0 loves Report
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Oxygenate posted
Thanks for this shower of advice!

To answer sjrobin: unmarried and very unlikely to inherit anything. Shame on both counts!

I will hunt out another couple of IFAs to get their opinions. Maybe I have been unlucky with IFAs but I have not been impressed by the few that I have talked with.
Posted on 18 December 2009 | Love 0 loves Report
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iPension posted
Probably the best place to look for an ifa is www.unbiased.co.uk
http://www.unbiased.co.uk/find-an-ifa/
You can search on postcode then tick relevant boxes to narrow it down
I would suggest 'Personal Retirement Planning' then select 'Pension Qualifications' and then further down 'level B qualifications' (which are higher)
From there you can then look at their websites and see which ones might have the relevant experience.

Another site is http://www.searchifa.co.uk/stakeholder.html
This is a link to the pension advisers page

Or you could try members of the Personal Finance Society a
http://www.findanadviser.org/find_an_adviser.aspx

I would be very surprised if you can't find a good adviser from within these sites
Posted on 18 December 2009 | Love 0 loves Report
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Ed Bowsher posted
Hi Oxygenate,
You're right to be sceptical about IFAs. Some of them are useful, some aren't.
For a big decision like this, it makes sense to get advice from an IFA, but you don't have to follow that advice if you don't like it.. In the end, you should make the decision yourself.
I wish you all the best,
Ed
Posted on 21 December 2009 | Love 0 loves Report
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Oxygenate posted
Many thanks to both you gentlemen for your thoughts.

Have a splendid Christmas and hopefully a prosperous New Year.
Posted on 22 December 2009 | Love 0 loves Report