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Retirement – Evaluation of Your Plans
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1Kryton57Full Member
I apologised if I missed something as I haven’t read all the detail, but TOJV; why aren’t you banging it into a Vanguard SIPP, which kind of feels easiest and cheapest in balance?
I’m just about to add my prior work pension to my Vanguard pot.
Also, a question from me (10yrs from retirement) – I have a Hargreaves’s Landown SIPP also which has higher fees than Vanguard although the funds performed well on the Bailee Gifford managed fund, would be cheaper inside Vanguard – any qualms about all your eggs in one basket?
KramerFree Memberany qualms about all your eggs in one basket?
I’m not sure what the investor protection rules are like for pensions so don’t know the answer to that question.
For other investments, the investor protection scheme has a limit of £85k so I’m careful to stay under that on each platform for precisely this reason.
blackhatFree MemberIFAs have a bias to be involved in gathering assets ie persuading people to save, to do it through them, and even better (for them) to promote some sort of product which will promise growth and low volatility. I would steer many looking for advice towards those people labelled “financial planners” because their approach is often to start at the end point – usually retirement – ask what you want out of that, then suggest how you might go about getting there. In my limited experience, you’ll likely feel a meeting with the latter rather more satisfactory (although as a retired financial services professional I feel I have less need for IFA input). The line between IFAs and financial planners is bit blurred, and they may occupy the same office but i have always thought financial planners do a better job making you feel they are on your side.
1weeksyFull MemberI’m happy with my pension as such but i could use knowledge on the 25% withdrawl at 55.
Things like how it affects contributions in the days after 55. How you go about taking the 25%. How you take say 10% out now and 10% later and the rules on that…. I don’t know who’s the person for that, either my pension provider or an IFA ?
1blackhatFree MemberIANIFA and haven’t yet gone through that particular process but for the technicalities I would look at the scheme documents and ask a financial planner if there is uncertainty. From my knowledge, whilst a lot of focus is put on that 25% lump sum, the downside is that any income from that lump sum (interest and dividends) is immediately subject to income tax. You can do a bit, followed by more bits. In fact, one strategy is to take the 25% as part of a regular monthly withdrawal – in that way you can try and ensure you are below a particular tax band. Financial planners might also suggest you fund your retired lifestyle by eating into taxable savings before doing something irreversible to tax advantaged savings. I strongly suspect Rachel Reeves will change the landscape at the end of October.
surferFree MemberI have done this with Interactive investor. Its quite a simple process and your platform will talk you through it. They will signpost you to the compulsory and free advice service which will give you a generic explanation of the paths available. Once you have decided which is best for you your platform will have a step by step process to follow.
The process will be unique for you depending on your circumstances. Consider mix of savings between SIPPS, ISA’s and other DB and DC pensions as well as your partners circumstances and their pensions, income and tax implications. what you owe on your mortgage, your foreseeable outgoings, plans to downsize if appropriate, health, aspirations in retirement etc. This is all the homework I would suggest you do before making any decisions. Its not as challenging as it sounds as we all carry much of this around with us in our heads.
I have an outgoings spreadsheet for the next 25 years (obviously more crystal ball gazing the further ahead it stretches) which is useful to predict many knowables such as council tax etc then build in inevitable % increases each year. Then match that with your future income stream as pensions come online (include their increases between now and when you take them) then consider how active you will be in earlier years of retirement and try to plan your spend appropriately.
1weeksyFull Member@surfer i’m thinking that the 25% will get rid of the mortgage as well as a new vehicle and a year or two of racing.
Once the mortgage is gone i’m in a massively better position financially especially as i’ll still be working.
3nickjbFree Memberi’m thinking that the 25% will get rid of the mortgage as well as a new vehicle and a year or two of racing.
Once the mortgage is gone i’m in a massively better position financially especially as i’ll still be workin
Well worth doing some research and getting some advice. The James Shack videos are good for this with often quite specific examples. I strongly suspect it would be a bad idea to take money to pay off the mortgage especially if you are still working. Your pension should be making more money than your mortgage is costing and you may limit what you can pay into the pension in the future and miss out on employer contributions and other tax benefits. Certainly don’t trust me though, and do some investigation 🙂
1surferFree MemberYes as above. I chose not to pay off our mortgage as I was making more money keeping it in savings, plus Mrs Surfer gets a lower interest rate through her employer. Worth creating a spreadsheet to see which works for you. Shouldn’t ignore the psychological benefit of paying off your mortgage early, for many that is incredibly liberating.
KramerFree MemberIANAE but
I strongly suspect it would be a bad idea to take money to pay off the mortgage especially if you are still working.
were my thoughts too.
weeksyFull MemberVery very interesting.. i never really thought of it like that. This is why threads like this are what makes this place useful. There’s a lot of good information out there for sure.
I will of course research all of this closer to the time, i’ve still got 24 months to go yet.
3surferFree Member@surferi’m thinking that the 25% will get rid of the mortgage as well as a new vehicle and a year or two of racing.
Some people look forward to the cash free lump sum to do something special. I used it to retire a bit early and our hobbies and aspirations can be met through our normal income. I dont want a sports car or a boat or a particularly lavish 6 star holiday or cruise, some people do. We have factored in annual holidays plus we have a camper van which is paid for and gives us all we need. the thing that was missing was the time to use it…
weeksyFull MemberWell my new vehicle was a new Transit Custom, not a Porsche GT3 🙂
6robertajobbFull MemberOn the other hand, I ran my spreadsheets for our circumstances, and *for us* it worked out better to take the lump and pay off the mortgage + anything else we owed.
(I was in the minority position where the DB pension scheme I was in had limited options for how to take + my specific circumstances meant the ‘pentalty’ for taking it before 60 doubled if I didn’t take it immediately but then took it before 60. Taking the £££ out into a £££ pot was also madness in our scheme.
I’m working still elsewhere, and paying into a new DC scheme along with some £££ from the employer (there’s some limits to how much I can pay in though).
I’d say the psychological benefit of having paid off the mortgage is significant – knowing that if I chose to I could just throw the towel in tomorrow and we’d not starve or lose the house, is really rather good for my health. The ‘spare’ cash subsequently has also been nice so we have been able to easily support our daughter through uni and into her 1st job, hundreds of miles from our own home.
I do still remember the words from a good mortgage advisor decades ago – “it’s no good being asset-rich but cash-poor”.
1inthebordersFree Member@surfer i’m thinking that the 25% will get rid of the mortgage as well as a new vehicle and a year or two of racing.
AKA pi55ing away your rainy day fund…
1weeksyFull Memberthankfully @intheborders some above gave a more constructive reply as to why that may be the case instead of just commenting like that.
dantsw13Full MemberKryton – my only issue with Vanguard is that you can only choose their funds – although they do have a massive choice.
HL are VERY expensive compared to either them or other platforms. A bit “reassuringly expensive….
I use T212 for my isa (no charges) and moved my wife’s pension to ii, flat fee which is very cheap for a large pot.
1theotherjonvFree MemberI apologised if I missed something as I haven’t read all the detail, but TOJV; why aren’t you banging it into a Vanguard SIPP, which kind of feels easiest and cheapest in balance
Because I don’t necessarily think easy and cheap is best value. Coming from someone that can’t make a job choice or car choice without taking advice from all and sundry, to think I’m going to bang best part of a million quid potential value into something because ‘it’s cheap and easy’ makes no sense to me!! I want expert advice and yes, I’m prepared to pay for it!
Also interested I’m being given advice by people who then admit they don’t know investor protection rules….. that fills me with confidence you know your onions.
Like i said, i appreciate you all taking the time to contribute but I’ll decide what to do with my pension arrangements thanks.
FWIW if it’s a pension then you’re covered to any amount. If it’s a SIPP you’re limited to £85k. You SIPPers did know that, yeah? Or are you now scrabbling to limit your exposure?
KramerFree Member@theotherjonv you were the one who started with
Might be cheaper in fees but are the returns as good?
And then started recommending IFAs and their above market return with no increased risk funds.
Please don’t get defensive when, in return, your “advice” then gets critiqued.
IFAs charge a lot of money, for what is often, IMV and that of many others, false reassurance.
I get that you find this stressful, but your attitude to finding out whether it really needs to be that stressful seems to be that it’s too important to shoulder yourself, but not important enough for you to spend some time finding out about it.
I’m not in SIPPs, but I am invested in funds that can be included in a SIPP, but mine are wrapped in ISAs. That’s why I don’t know about pension protection, and admitted it. Would you rather I bullshitted about it?
nickjbFree MemberFWIW if it’s a pension then you’re covered to any amount. If it’s a SIPP you’re limited to £85k. You SIPPers did know that, yeah? Or are you now scrabbling to limit your exposure
It doesn’t really apply in practice though. SIPP providers don’t own your shares so if they go bust the creditors can’t be paid with your assets, the shares are safe. Same goes for cash, it should be held by another bank or trust, although if you have over £85k in cash in your SIPP you probably should get some financial advice 🙂
KramerFree MemberBecause I don’t necessarily think easy and cheap is best value.
In that case, you will be well suited by an IFA and probably some actively managed funds. I honestly wish you the best of luck because if you’re doing ok, it’s highly likely that I will be too.
1theotherjonvFree MemberAnd then started recommending IFAs and their above market return with no increased risk funds.
Have I? I don’t think I’ve given any recommendation to use an IFA per se, just a suggestion of things to look out for. I talked about my situation and why i think it’s the right choice for me, I don’t think I’ve recommended that anyone else should use one, if you’re confident in what you’re doing. Whereas in the other direction I’m being called daft for considering using one.
What i specifically said was that just moving to the cheapest fees doesn’t mean the best overall outcome, you need to look at returns as well. I don’t think that is disputable? I have noted the incoming comments that managed pensions do worse longer term than passive ones, and the scepticism about anyone claiming to outperform the market – I’m looking at that.
And secondly, to be aware that not all schemes offer all withdrawal methods, so moving something only to have to move it again later when it comes to getting access to your money might be a consideration. Also pretty much a fact.
it’s too important to shoulder yourself, but not important enough for you to spend some time finding out about it.
No – what i specifically said was ” don’t have the confidence to do it and are worried about bollocksing it up”. It might be my personality flaw but for me to get to a confidence level on what’s going to be best part of a million quid, would take -> ME <- an awful lot more than watching a few Youtube videos on the bog. Now, YMMV and that’s fine. I’m not calling anyone daft because they’re for having a semi-skilled amateur’s punt at it so don’t do the opposite.
2KramerFree MemberWhat i specifically said was that just moving to the cheapest fees doesn’t mean the best overall outcome, you need to look at returns as well. I don’t think that is disputable?
Yes, I’m afraid that it very much is.
Fees are predictable, returns are not.
This is exactly how actively managed funds fleece people repeatedly. But there’s no point in trying to warn people who don’t want to be warned, so point taken and I wish you the very best.
1theotherjonvFree MemberIt doesn’t really apply in practice though. SIPP providers don’t own your shares so if they go bust the creditors can’t be paid with your assets, the shares are safe.
Sorry, I don’t really understand that, I tried to google and just found this. If you can explain further, maybe there’s a few with >£85k SIPPs that will benefit. I asked the (potential IFA) if having a variety of pensions was a benefit because of the £85k and that’s where he told me pensions are protected to full value, SIPP’s to £85k, which broadly (I don’t remember exactly, once he’d said not relevant) ties in to that FCSA info.
1theotherjonvFree MemberSo taking that to its conclusion, pension investments are easy, just put them into the one with the cheapest fees because that’s predictable?
I don’t mind being warned, gives me a good list of questions when I meet the IFA to discuss options. Thanks for the advice and all the best to you too.
1andylcFree MemberRef a SIPP – if you spread your investments then there’s no worry about the £85,000 limit as like someone has been said before, they don’t own your shares so in the unlikely event your SIPP provider went under you’d still have your investments- they’d just need to be managed via a different platform.
I disagree that cheapest fees are automatically best though! But there are good cheap all-in platforms (eg Vanguard) and very cheap SIPP platforms where you can choose your own investments if you want. My Interactive Investor platform charges £12.99 per month, which at my current level of investment is 0.04% per year, getting lower the more I have. This is of course separate to fund management fees which vary from 0.05% to just under 1% depending on the fund.KramerFree Memberpension investments are easy, just put them into the one with the cheapest fees because that’s predictable?
As long as you are diversified and there’s some form of rebalancing going on then choose your risk level and AFAIK yes.
And it’s not just a few YouTubers and grumpy middle aged men off the internet who are saying it, its starting to become standard industry advice.
Get a book on personal finance and read it, see whether it tells you something different?
Look, it’s your money to invest as you please, so do what you’re happy with.
shintonFree Member@theotherjonv you may wish to take a look at a robo investing platform such as nutmeg which essentially does the same job as an IFA for investors who aren’t confident in investing AND they keep the fees low.
One question to ask your IFA is what are the OCF charges for the funds they invest in?
blackhatFree MemberHL don’t need to be as VERY EXPENSIVE as many presume. If you have unit trust type vehicles, including the Vanguard range, then yes, they will be relatively expensive. But if you own shares, including investment trusts – many of which perform as well as, often better, than the equivalent unit trusts – the fees are capped in absolute terms, and at a relatively low level in % terms. And for those after a tracker, ETFs are trackers but because they have an exchange listing are treated as shares – and therefore subject to the same fee cap.
Kryton57Full MemberAnyone know about Scottish widows ? It’s my default work pension with 0.4% annual charge, and I’m wondering whether to consolidate the last 3 years of my old work pension into it or Vanguard. The latter is 40% obviously cheaper, jus wondering if SW might outperform the difference in their “middle risk” option.
1prettygreenparrotFull Memberyou may wish to take a look at a robo investing platform such as nutmeg which essentially does the same job as an IFA for investors who aren’t confident in investing AND they keep the fees low
Or you may think differently https://www.wired.com/story/beware-roboadvisors-wealthfront-betterment/
2andylcFree MemberScottish Widows workplace pensions rate very highly in terms of performance. In terms of actual
growth, my SW workplace pension has had 35% in 5 years. Looking at fund details for Vanguard target retirement 2040, this has grown a very similar amount in that time.Although it’s easy enough to get better returns than this just by using global and US tracker funds in a SIPP.
Anyway…here’s an article about workplace Pension providers, with SW coming out very well:
https://www.yodelar.com/insights/how-default-pension-funds-can-impact-your-retirement
1prettygreenparrotFull MemberMmm. That Yodelar content has a nugget of truth: default pension fund choices may not suit you in saving for a pension because your risk profile and goals may be better served by a different mix of funds.
But most of it reads like chatbot auto content.
robolaFull MemberMy wife has a SW pension, it is has been very poor value IMO. Far too much moved to cash and bonds as she got older which left her overexposed to the bond crash. And very high fees to further suck the life out of it – charging 1% management fee on the lot, including the cash element!
Kryton57Full MemberOk thanks for the feedback, I think I’ll stick it in my Vanguards SIPP Lifestrategy 100 leaving it until about 5yrs from retirement when I’ll maybe move it to one of two others in my SIPP, Target retirement 35 & 30 respectively.
The SW can stay for the Sal Sac & company contribution until it’s no longer needed at medium risk. I’ll set the retirement date to 67 rather than my target of 62 to avoid them moving it to Bonds to early should I have it that long.
andylcFree MemberI think most all-in pension policies – Vanguard included – had too much reliance on Bonds and therefore suffered pretty badly from the bond crash. I’m confused by bonds to be honest – even without the crash the returns are very modest and Index trackers do better even when taking into account market crashes. Most of us have ben in retirement would be more suited to leaving funds invested, other than those looking to take a maximal lump sum.
SW workplace pensions have pretty low charges. Having said that if going ‘all-in’ I’d probably stick with Vanguard.inthebordersFree Memberthankfully @intheborders some above gave a more constructive reply as to why that may be the case instead of just commenting like that.
Did you really need a “constructive reply” to the idea of spending your pension lump sum on a vehicle and a bit of racing?
But then I’ve seen others spend it on the ‘holiday of a lifetime’…
weeksyFull MemberDid you really need a “constructive reply” to the idea of spending your pension lump sum on a vehicle and a bit of racing?
I felt either you or I have read something completely wrongly.
My contstructive reply was in relation to someone commenting that paying off your mortgage was pissing money away, due to the lower rate of interest between saving and mortgage meaning you actually get more by keeping it in savings/pensions that you’re spending on the interest in the mortgage.
I have no issues at all pissing it away going racing and buying a van for it, i’m 100% fine with that and don’t see that as pissing it away in the slightest. That may be completely weird to some (or even all) on here, but i’m completely fine with whatever it costs.
andylcFree MemberI get the comments about mortgages but I must admit I am trying to do both – being mortgage free is something that will make my job decisions much easier to I’m throwing money at pension, ISA and mortgage overpayment in that order of priority.
robolaFull MemberI should add that the Scottish Widows pension was a private pension sold to teachers as an add on to their workplace pensions. They had an IFA come in during a staff meeting to do a sales pitch and loads of them signed up. I was not really in the pension mindset at the time so thought nothing of it. In hindsight she could have done much better without the IFA flogging a high fees product. One of the many reasons I will never touch an IFA with a barge pole now.
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