Query about friends first magnet portfolio

L

laois1

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I hope you can advise. My husband has been contributing regular annual amounts to the above fund since 2007. His accountant acts as his broker and I have some doubts about whether he is doing things properly. Anyway we got married in 2012. Just recently we decided to see how the fund was doing and to check on the balance etc so we got the login details from friends first. Turns out the details on there state that my husband is a single man and that there are no benefits payable under the policy for wife or two children. We are also worried that the above policy is a little risky 5/6 according to the website. We had not bothered checking anything until now. What are the options ? Can we change funds and policy benefits for amounts already invested. Is it wise to use our accountant to continue to do this given that he knew about our marriage while still taking cheques for a single mans policy ?? I'm sure he's on commission. Anyone know how much ?
 
A number of issues:

  1. He was probably single when he started the policy. Friends First just haven't been notified of the change in marital status. It makes no difference to the policy.
  2. Have you asked for life cover? If not, why would there be a policy in place?
  3. If the plan is a single premium policy (your husband makes once off contributions each year with no obligation to make any more), you can't have life cover as part of the policy. It is a bad idea to incorporate life cover in a pension plan. The initial cost is very cheap but gets very expensive as he gets older. It starts eating into the pension element, just when you need that to be accumulating. It is better to have life cover completely separate. If you husband is self employed, it can be done in a tax efficient manner where he gets tax relief on the premium.
  4. If the fund is too risky, you can change it, there's no problem in that regard.
  5. Some accountants think that being a financial advisor is easy, when in fact, there is a lot of work involved in it. You are better using someone who is an expert in what they do and not someone who uses it as a bolt on to their main area of expertise.

Gordon, the magnet portfolio is an investment strategy used by Friends First. They have 4 different funds within the Magnet range with the Portfolio one being the 2nd most risky.

Steven
www.bluewaterfp.ie
 
Thanks for replies. Yes they have not been notified of a change in marital status. My question was not about life insurance. I was wondering about pension benefits for wife and children if husband were to die first. What happens with the current plan - it says on screen that there is zero benefits to spouse. Is it possible to add in a benefit to spouse and children ? What happens with all the money paid in if husband dies before retirement ? Yes he is doing it in a tax efficient manner.
 
I'm not sure what you're asking. With personal pensions, there are no special pension entitlements when someone gets married. If your husband dies before retirement, the value of the pension is paid to his estate, which it does whether someone is married or not.

When he gets to retirement age, he has the option of purchasing a spouses pension which is paid to you if he dies first.

Steven
www.bluewaterfp.ie
 
So is the entire pension paid to the estate automatically before retirement age in the event of death. If there were no spouses provision written in and the person died a week after retirement what would happen ? I'm clueless about all this. How much would the spouses option cost ? Is there any link on here to pension rules that I could read thanks.
 
Yes, the entire amount is paid to his estate.

Pensions usually have a guarantee to be paid out for 5 years, so if he died a week afterwards, there would still be 5 years payments to be made. In the absence of that 5 year guarantee, the whole lot goes to the insurance company (the people who die early pay for the people who live too long).

How much does a spouse's pension cost? It depends on your age and how much of a spouse's pension you are getting. You can get 100% of what your husband was paid (that would cost more) or a lower percentage, say 50% (that is what the civil service spouse's pension pays).

Then you have the ARF option where you control the fund yourself and on death, the remainder of the fund goes to his estate.

A few blogs I wrote on retirement options below.


http://www.bluewaterfp.ie/pensions-2/retirement-options-explained-part-1-of-3-annuity/

http://www.bluewaterfp.ie/financial-planning/retirement-options-explained-part-2-of-3-arfs/

http://www.bluewaterfp.ie/financial-planning/retirement-options-explained-part-3-of-3-taxable-cash/


Steven
www.bluewaterfp.ie
 
Thank you Steven. I will certainly read your links. 5 years seems very short to recoup what's been put in, I would imagine that you would only recoup a fraction of what had been paid in ? Say putting in 10 k per year for 20 years. I know it's tax efficient and the accountants all push this angle. I will check to see if there is a five year guarantee. I'm terrified of all these loopholes if you are not aware you could get badly stung. It seems that that you must either die before retirement or live to 90 to get all your money back or is this a little simplistic ? Ps any idea what the commission on an amount like this would be. I know the advisors have to get paid but we are wary of this whole thing given our lack of knowledge and the pitfalls which may not always be clear at the outset.
 
You won't recoup the money in 5 years. That is the minimum period it will pay out for. On the flip side, if you live to be 110, the insurance company will still pay out and be at a loss. They are betting on your mortality.

The 5 year guarantee is for post retirement annuities, so there will not be a guarantee on the pension fund he is paying into. The guarantee bit is later, at retirement.

You have to ask your accountant what he is charging you. He should disclose what he is being paid, it is a Central Bank requirement.


Steven
www.bluewaterfp.ie
 
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