subject: Why You Should Review Your Pension Provisions Before It's Too Late. [print this page] SOE Pensions is a division of SOE Consultants Limited, a small firm of Independent Financial Advisers. The Financial Services Authority number is 476574 & the Company Number is 6442365 (Registered in England and Wales).
We offer written advice and recommendations to our clients, which most importantly, is a fee free service without obligation. Our very successful business works on the basic tenant of offering advice and not a sales based process. If we cannot illustrate to you that we can add significant value to your pension we do not deserve you as a client. We know that by offering advice without up front fees, we can demonstrate our commitment of excellence to our clients, and history has shown that this is the best way for us to further our business, by putting our clients first.
The S.O.E. Consultants pension review service can help you maximise your pension returns and future growth. The pension review service will look at the status of your current pension funds performance and its future projections. By changing the allocation of the funds in which your pension is invested we will show you how you could improve you returns for the future. Our pension review service aims to minimise your risk and maximise your returns based on your specific objectives and requirements.
The pension review service begins with the client completing our on line enquiry form which automatically produces an access letter to your pension provider, which you will need to print off and forward to us. Once we have your signed access letter we approach your provider and request full pension details. We then carry out a full and detailed review which covers your current providers product charges, investment performance of your current fund options, the full range of fund options, flexibility of terms, financial strength of the provider, and on going policy administration. The resultant report to you will place your pension product within the market in terms of charges and performance, and we will also provide you with a projected benefit statement for your chosen retirement age.
Investment performance is very complicated and before we can recommend any fund options to you we, will need a very detailed discussion with you, with particular reference to your attitude to risk and return, which will allow us to identify you as one of the following.
A Defensive Investor is looking for an investment where the value of their capital should not fall in the short term and aims to produce returns that are comparable with those from a high street deposit account, but have the potential for some long term growth. They would feel very uncomfortable if their investment rose and fell in value very quickly.
A Cautious Investor is looking for an investment which, while giving some potential for real returns, aims to produce returns that are at least as good as those from a high street deposit account. A high level of security of their capital is a priority. Whilst recognising that investment values will change, they would feel uncomfortable if their investments rose and fell in value very rapidly.
A Balanced Investor is looking for a balance of risk and reward, and whilst seeking higher returns than might be obtained from a deposit account, recognises that this brings with it a higher level of risk and that the value of their investment may fluctuate in the short term. They would feel uncomfortable if the overall value of their investments were to fall significantly over a short period and would not be happy to see their capital eroded.
A Moderately Adventurous Investor is generally market aware and understands and is willing to accept a higher level of risk in return for the potential for higher returns in the longer term. They recognise that this may result in the value of their portfolio fluctuating, possibly significantly, in the short term.
An Adventurous Investor is willing to accept a much higher level of risk in return for the potential for higher returns in the longer term. They recognise that this may result in the value of their portfolio fluctuating, possibly significantly, in the short term. They are aware that the risks are such that a significant percentage of the capital sum could be lost.
The advice we will offer will range from.
1. Retaining your current provider, contact and fund options.
2. Retaining your current provider and contract, but change the fund options.
3. Transferring your pension to a new provider, contract and fund options.
Points to Consider when transferring your pension to another provider
Exit Penalties will your current provider levy an exit penalty?
Charges will an initial charge apply upon investing a transferred pension? An initial charge will have the affect of reducing your transfer value at investment. What is the annual management charge of the new contract compared to your existing plan? Additionally does a policy fee apply to your existing pension and the new one? However, charges are only part of the equation; charges must be looked at in light of fund performance.
The affect of these charges must be detailed by (a) continuing with your existing provider and (b) transferring to a new arrangement.
Fund Selection Are you in the right funds for the current global investment cycle covering all investment sectors? Are you invested in to funds commensurate with your attitude to risk and return? Is your pension fund regularly reviewed? Are your pension fund options managed by a professional? Do you wish to take advantage of specialist fund investment?
Guaranteed Annuity Rates Does your existing policy offer these valuable contract terms? We compare the guaranteed rate to current market rates; will the Guaranteed Annuity Rate produce an income that is higher than the best in the market? Giving up this valuable benefit should therefore be considered very carefully.
Consolidation in undertaking a consolidation of your existing pensions to allow for simplified administration in future, we need to take in to account all parts of the review process.
We would generally recommend that final salary pension schemes remain in place, but we would look at your options taking in to account guarantees, lump sum entitlement, death benefits and critical yield.
S.O.E. Consultants Limited takes nominated commission totalling 0.5% to 1% of your fund value per annum (see menu options) which remunerates us for ongoing reviews, advice and fund switches. Regular reviews and fund switches inevitably leads ultimately to superior performance and significantly reduces investment risk. This is in contrast to most of the industry that enjoy very high initial commissions with no annual fund based commission, which of course results in an emphasis on the initial advice without the required ongoing advice and service. Lower initial commissions and an annual amount are better for the client and the annual ties us in to ongoing advice, which leads to our remuneration being on a reward basis. If we do well for you and your pension fund goes up, so will our fund based remuneration. If your fund goes down we earn less which is only right and proper.
We offer fund management with three menu options.
Menu Option 1
A balanced portfolio comprising equities, fixed interest, bonds, property & cash, so that you are not overweight in any one sector. We will recommend a number of fund managers within each sector and we will rebalance your fund every quarter, together with an annual report, fund valuation and resultant fund switching advice. This option carries a 0.5% nominated annual fund based charge by the encashment of units within your pension fund (0.0416% per month)
Menu Option 2
This is very aggressively managed with quarterly reviews and fund switching advice. Because the funds in this menu option chase performance we are currently recommending the following sectors, Far East, Global Emerging Markets, BRIC Funds (Brazil, Russia, India & China) commodities, soft commodities (food, agriculture & farming) energy, and very select funds in the UK, USA and Europe. Owing to the fact that you will receive a quarterly report, fund valuation and resultant fund switching advice, this menu option carries a 1% nominated annual fund based charge by the encashment of units within your pension fund (0.0833% per month).
Menu Option 3
For those clients who require information only, and wish to choose their own fund options from a recommended list, we will supply details of recommended investment sectors, a range of vetted fund managers, a fund valuation and an annual report. This option carries a 0.25% nominated annual fund based charge by the encashment of units within your pension fund (0.0208% per month).
Each client is added to an email list and each client will receive an economic review which will also include a valuation and fund switching advice. You will merely need to email a response back with a yes to proceed (or no as appropriate) or can we talk first. If fund switches are made you will receive a confirmation email from us. When we review your funds and recommend fund switching we will carry this out on line for you which is instantaneous, without the need for written instructions to the provider. Moreover, the application process for pension transfers is quick and simple with electronic applications made on behalf of our clients.
We believe the best guide to the future is top quartile performance (top 25% of peer group funds) over key investment terms of 1, 2, 3, 4 and 5 years. We look at each year in isolation (discreet performance) rather than over blocks of years (cumulative performance) because the latter hides bad years. We want a smooth ride for our clients, not funds up one year and down the next. Highly respected third party ratings are also used to endorse good funds.
By way example, menu option 2 has 26 fund managers, with a small selection detailed below.
One Year / 5 year Annualised Returns
Allianz RCM BRIC Stars 32.0% / N/A - 3 year gross is 133.3%
Fidelity SE Asia35.9% / 21.3%
First State Global Emerging Markets 32.5% / 19.4%
M&G Global Basics (food) 37.0% / 12.9%
Neptune Russia 42.8% / 23.5%
JPM Natural Resources 44.2% / 20.3%
Investec Global Energy 38.7% / 13.6%
Here are just a few funds that we have recommended our clients invest in to. It is of paramount importance to appreciate that the 1 year returns are phenomenal because markets have recovered dramatically since March 2009 (despite the recent volatility) and by contrast, the 5 year annualised returns and 3 year returns take in to account heavy loses during 2007/08. Whilst these fantastic returns cannot be guaranteed in the future, the global economy is still in recovery mode, and the ride could be bumpy over the next year or so. However, investment timing is everything and you have to be in the market to take advantage of investment returns.
Looking at this table and being conservative, so as not to over play performance so it becomes misleading, lets look at the M&G Global Basics Fund. This is a mainstream fund whereas the others are specialist and I think for that reason looking at M&G is more appropriate. This is in the global equity sector which has hundreds of peer group funds. The average return in this sector over one year is 22.9% and over five years is 5.0%, so the M&G fund has performed very well against the peer group with top quartile performance (top 25% of peer group funds) over key investment terms of 1, 3 and 5 years, and a 4 star rating by MorningStar, a respected third party rating for performance on both a consistent and absolute basis. Please note that we are not necessarily recommending any of these funds, we would have to assess your attitude to risk and return before doing this.
All performance data has been taken from Money Management July 2010, a Financial Times publication which is totally independent, and it is important to note that past performance is not necessarily a guide to the future.
by: S.O.E. Pensions
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