Comparing Pensions

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The main providers

• Specific pension provision can come from the following sources:-

  State Schemes - Basic, State Earnings Related Pensions Scheme (SERPS) and Second State Pension (S2P). Occupational Schemes - Private sector and public sector. Personal Pension Schemes - Personal contribution only or personal plus employer contribution.

• Occupational schemes may be:-

  Funded, as with most private sector schemes, or Unfunded as with many public sector schemes, where pensions are paid out of current revenue on a pay as you go system like the State Schemes. Where the scheme is funded, it may be:- 'Insured', which merely means that it is managed and administered by an insurance company, or Self Administered, where the company organises the scheme itself, hiring suitable professionals to carry out such functions as investment, actuarial and legal work. Certain related benefits, such as life assurance benefit, will usually be insured through specialist companies.

Comparing providers

Financial Strength

• Consideration should be given to:-

  Press and company own reports on volume of business, and any increases/decreases since last reported. Make up of new business i.e. balance of single and regular premium, balance of life and pension business. Liquidity ratios, profit margins as revealed by company reports and statements. Free Asset Ratio history, although neither this nor any other ratio should be used on its own. Additional consideration might perhaps be given to compliance history, including fines paid, systems reorganised, training redone.

Quality of service

• A number of the following could be checked through your financial adviser:

  Answering of queries by telephone/letter. Production of correct figures. Correct processing of paperwork. Preparation and delivery of policy within a reasonable period. Correct and timely delivery of bonus notices, unit statements. Correct and timely payment of annuities, or collection of premiums.

Investment choice and performance

• Your attitude to risk will need to be balanced against the performance requirement to achieve your pension planning.

• Investment performance history should be considered, but along with changes in market conditions so that there will be no automatic assumption that performance will be repeated.

• It should be borne in mind that charges will have an effect on performance.

REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.