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Original poster

Pension advice

16 replies

StarOnTheTree · 19/01/2017 13:24

I paid into a personal pension for a short time many years ago. I've just phoned them to get an up-to-date statement and they said that the pension was now worth zero.

They said it was worth £1,000 at the end of 1997 but charges over the last 19 years have eroded this value until it reached zero

Does anyone know if that sounds right? Have I really just lost it all? I know it wasn't much of a pension pot but every little bit helps and I'm a bit gutted that I paid into a pension but I won't get anything back.

OP posts:

dontcallmethatyoucunt · 19/01/2017 18:16

Unfortunately with old style pension, in theory that could happen. This is why such charges have been banned, firstly with stakeholder changes and then with RDR and other such things.

The problem you faced is that despite these things being banned, they didn't have to make retrospective changes to existing contracts.

All that said, I am shocked that this has happened and it illustrates the problem that we face with financial services companies. I am shocked that the growth would not cover the charges, but there could have also been an investment issue, ie inappropriate choice of funds.

I sell pensions everyday and I have never yet seen one disappear, it wouldn't be possible with low % charges and no minimums.

Sunseed · 19/01/2017 18:16

Can they give you a statement showing the annual charges and other deductions, versus the annual growth? It is very possible that charges have outstripped growth depending on what the underlying fund choices were.

dontcallmethatyoucunt · 19/01/2017 18:17

Out of interest, which company was it with?

Original poster

StarOnTheTree · 19/01/2017 18:34

It was with Albany Life so it's taken me a while to find out that Canada Life had taken them over.

OP posts:

childmaintenanceserviceinquiry · 19/01/2017 18:37

definitely get documentation from them if you havent been receiving that. Sadly annual valuations might have shown you the issue earlier.

Original poster

StarOnTheTree · 19/01/2017 19:43

I'll definitely get a breakdown of where the money has gone. I guess it's my fault for not keeping on top of it but I was so young and clueless when I took out this pension that I didn't realise I needed to do anything

At the same time I also opted out and I spoke to that pension provider today who explained what that actually meant. I'm not happy at all. I had no idea what opting out really meant, just that it was something to do with the state pension!

OP posts:

childmaintenanceserviceinquiry · 19/01/2017 19:57

re the opting out: you would have been given information about that at the time. It was basically that instead of paying into the state second pension you paid into a private scheme. So your NI contributions at the time were lower but the govt paid incentives into the pension schemes as well. I have forgotten the extra amount. It was a big deal when pensions were really shaken up in 1988.

But it is an election that, i believe, changed with every new pension scheme you joined (before opting out changed again). So you shouldnt be opted out for other schemes unless you chose to do that.

Worth getting a state pension scheme valuation - then you can see what further years of NI contributions you would need to make to get a full state pension.

Original poster

StarOnTheTree · 19/01/2017 20:03

Worth getting a state pension scheme valuation - then you can see what further years of NI contributions you would need to make to get a full state pension.

I set up a personal tax account online that shows this which is what prompted me to check up on all my pension stuff. There is a COPE amount stated on the account as part of the opted out information. It just doesn't say how that amount relates to my state pension forecast. The pension provider told me today that the amount is how much my state pension will be reduced by.

OP posts:

childmaintenanceserviceinquiry · 19/01/2017 20:16

I think you write to the NI people for the state pension valuation. Sorry my personal tax account has locked so I havent been on mine in a while so dont know what the COPE bit would be.

Original poster

StarOnTheTree · 19/01/2017 20:24

The state pension info on personal tax accounts is quite comprehensive. It lists every year since I left school and states if I paid a full year of NI contributions or not. It also tells me when I can start to get my state pension, how much I'm likely to get and how many more years NI contributions I need to pay to get the full pension, so I have 20 years left and I only need to pay NI contributions for 7 more years to get the full pension.

The COPE amount is listed separately and I didn't know how it related to the rest of the information until today.

OP posts:

Sunseed · 19/01/2017 20:40

COPE stands for Contracted Out Pension Equivalent. It estimates how much you ought to expect to receive as an annuity from the scheme where your contracted out NI contributions were invested; in other words what you would have been entitled to if you had stayed contracted-in.

Original poster

StarOnTheTree · 19/01/2017 20:45

Sunseed Can you opt back in? Or is that not possible once you've opted out?

OP posts:

dontcallmethatyoucunt · 19/01/2017 21:13

Everyone is back in now, contracting out has stopped.

Sunseed · 19/01/2017 21:15

Contracting out has been abolished now with move to flat rate state pension so everyone is now contracted in.

Can you remember when you started the scheme? I am wondering whether you had accrued any guaranteed minimum pension (GMP) entitlement. The main rule changes affected pre 1988, post 1988, and pre/post 1997 contributions.

Original poster

StarOnTheTree · 19/01/2017 21:20

Sometime around 1993-1994

OP posts:

languagelearner · 20/01/2017 17:12

"They said it was worth £1,000 at the end of 1997 but charges over the last 19 years have eroded this value until it reached zero hmm

Does anyone know if that sounds right? "

Unfortunately it sounds right on the dot, sadly. We're always warned that big fees erode the capital put into pension funds, the fees doesn't have to be particularly big in percentage points, but build up over time. It's called "interest on interest" or "compound interest".

If you had received, say, 5% of interest over the 20 years since 1997 it would have been worth 1000*(1,05)^20 = £2600 today, so it's not so big that you will not be able to cope without it. The good thing is you were young when you put the money into the fund 20 years ago, and thus you're not overly old now either. There's time to regroup. Read up on the topic, do not trust "advisers" giving you "advice" (often resulting in money falling into their own pocket). Think it over. Pick wisely (perhaps index funds). Don't put all eggs in one basket, etc. Trust your gut feeling, if you don't understand the concept, it's probably not any good (for you that is). If it's of any comfort to you, it has happened to me too, although I'm in another country (have a different citizenship). You grind your teeth, then pick up the pieces, and regroup...

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