Pension transfers and asset classes

If your pension fund is worth over £50,000 it really is worth getting in touch with us, the text below will explain some of the reasons we believe it is important to review your fund and provider, here is our process for dealing with your pension fund transfer.

Step one

Undertake a review with you.
Make a proper assessment of your attitude to risk.
Provide you with a report outlining what we believe to be is the correct asset mix for you.

Step two

If you agree to retain us, we will recommend a switch of your funds to the correct mix of assets. If these asset classes are not available through your current provider, or if they have poor experience in these areas, we will recommend a pension transfer to a provider with the right funds and the appropriate financial strength and experience. If you have a number of smaller funds, consolidating your fund under one roof can often achieve savings by obtaining large fund discounts.

It might prove to be non-profitable to switch out of With Profits funds because your current provider may have locked you in by way of a market value adjustment on effecting a transfer. In other words, the value of your fund could be less that the amount you have invested because of the current value of the equities within some With Profit's funds will have dropped in the last 3 years. It is still important that you review your finances even if you do have a contract in one of these funds. In these cases we will offer you the opportunity to reduce your risk and reliance on your current With-Profit provider and thereby the risk of insolvency by redirecting your annual or monthly contributions in the way described above.

To start the ball rolling Contact us with details of who your fund is with and the approximate current value - telephone on 0207 407 8787.

Asset classes

When was the last time you reviewed your pension? Not recently enough is often the answer. By far our most troublesome finding is that many people leave their pension funds lazily sitting in the Balanced Managed funds or *With Profits funds of leading pension companies such as Clerical Medical, Friends Provident, Standard Life, Norwich Union, Legal and General and Equitable Life.

The problem with Balanced Managed funds is that they predominantly hold one asset class, namely, equities. Pall Mall Financial conducted a survey of the investment portfolios of the a typical managed fund and interestingly found that something like 60-80% of the assets of the top five major investment are held in equities. This means that if you hold one of these pension schemes, you will have seen the value of your pension fund rise steeply up to December 1999 and fall back by 40-50% by early 2003 then rise back in the later years to now. a bit of a rollercoaster ride.

This clearly is not a profitable strategy for the majority of people. Furthermore, many clients might not be aware of the risks they are taking by doing nothing as the trade-off between risk and reward has not been fully appreciated or explained. Purely by chance your retirement strategy may work but the likelihood is that it probably won't as you are overexposed to one asset class.

Our solution

Different types of assets, such as equities or bonds, behave in different ways. Therefore, the first step in forming any investment strategy is to achieve the right balance between major asset classes. This “asset allocation” is fundamental to meeting your investment goals in the medium-to-long term. In fact, asset allocation can be as important as the choice of individual funds themselves.

Asset classes such as Bonds, Gilts, Property and even Cash have performed very well and are effected by different external factors that effect the stock market, therefore it will be in your interests to review this mix regularly and strike a proper balance in your portfolio.

At Pall Mall we believe it is paramount to achieve a balance between the allocation of funds to asset classes and your attitude to risk. In other words, if your attitude to risk is aggressive, say 8/10 on the risk scale, then you might want to hold a greater proportion of higher-risk, higher-return assets whereas if your attitude to risk is more cautious say 3/10, you might want to invest in more low-risk lower-return assets. We believe that for you future financial security, you should obtain a 'balance' of asset classes.

Questions - Contact us by email or telephone on 0207 407 8787.