Personal pensions as the name suggests are individual pensions. Unfortunately this is where the simplicity ends and there are literally hundreds of types of plan including stakeholder, section 32, retirement annuity contracts (RAC’s), Self invested, self administered and many others. Navigating this complicated world is therefore extremely challenging for any expert let alone the owner of the plan itself.
Essentially a pension is simply a “tax wrapper” and all pensions require an “underlying investment”. The tax wrapper itself provides tax relief on your contributions (in other words where you put money in the government will also put money in). Your money also grows tax free.
It is important to remember that some older plans may have special features built in that would be lost on transfer. For example a guaranteed annuity rate, a guaranteed rate of return or enhanced tax free cash. These features are irreplaceable if moved and therefore you should proceed very carefully indeed!
Once the tax wrapper (ie a pension) is selected as most suitable for you, the actual investment within the pension itself is key, as this is where your potential growth will be generated. We have come across pensions that have not grown for over 10 years! We use market leading technology to compare your old funds with those being recommended to demonstrate the additional growth potential that may be available via switch.
The other important element to consider is charges. All pension providers charge for their services but not all pension providers charge in the same way making it extremely difficult to understand. Some providers take money from you in various ways and it may appear they enjoy adding these layers of complexity to put clients off from shopping around properly.
Here at Financial Fortress, we are experts in pension planning. We will write to all your providers and obtain accurate information about your plans, explaining any special features carefully before using cutting edge software to “strip out the noise” and compare all existing plans with those available in the marketplace on a like for like basis. Where your existing plan may use specific growth rates of say 1%, 3% and 5% for their illustrations and possible new plans uses completely different rates, our software removes these discrepancies to ensure accurate comparisons on a like for like basis. Simply put if your existing plan grows at a straight 5% a year it will be worth X, whereas if your new plan grows at 5% a year it will be worth Y. If Y is higher than X we will then discuss the pro’s and con’s of a switch. It is impossible for anyone to complete this themselves.
The systems then generate a detailed report which your adviser will clearly explain and simply put, compares your old plans versus the market place to demonstrate clearly what your overall costs may be compared to the plan being replaced.
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