Full pension or reduced with pension with lumpsum?

EdInvestor

dunstonh wrote:

YI, investment bonds, when used correctly can reduce significant tax liabilities

I think dunstonh means "defer" not reduce.

Watch out for the "income" these bonds pay as well: it's often actually a withdrawal from your capital.

Also watch out for exit penalties hidden in the small print.

Be sure to check charges on these products,they pay some of the highest commission in the industry.

See here, under "investment bonds":

https://www.fsa.gov.uk/tables

,

dunstonh

I think dunstonh means "defer" not reduce.

No, I mean reduce. Deferment is part of the process to reduce it. Majority of those cases will actually be deferring it to a time when it doesnt apply.

Watch out for the "income" these bonds pay as well: it's often actually a withdrawal from your capital.

So? Its no different to withdrawing 5% from a bank account. You are withdrawing your capital then as well. With bonds you get the choice of natural income withdrawal or fixed %/amount withdrawal. If you choose a fixed amount/%, then it is treated as capital withdrawal. Just as going down the bank and drawing the same percentage out each month. Of course, x% is being added in and as long as you dont withdraw more than it makes, then you have no problem.

Also watch out for exit penalties hidden in the small print.

Stupid comment. Bonds are a product with many variations. Some will have an initial charge, some will not. Some will have a 1-5 year tie in, some will not. Many will give you an increased allocation (free money up front). If you then surrender in the first 5 years, they will then want a stepped percentage back. These charges are certainly not in the small print. They are very clearly shown.

Be sure to check charges on these products,they pay some of the highest commission in the industry.

Media hype again. Set up on full standard terms, these often pay no more than an ISA, Unit trust or OEIC. However, they do allow the advisor to forfeit trail/renewal commission and take an increased amount initially. Typically, its around 4 years renewal. Many IFAs will take the opportunity to refund some of that commission to enhance the benefits. Even if they take trail, some initial is often forfeited to enhance the product. So, if you hold on to a bond for 10 years, the higher initial commission would be a lot less than had they taken a lower initial commission plus trail.

The commission is totally irrelevant to the consumer. Its the charges that matter. Is it better to have a product on 1% charge but pays the advisor 5% or better to have a product on 2% charge but pays 3% commission?

You shouldnt look at what the advisor makes. In many cases, that figure is wildly inaccurate as the advisor is not getting that money. It can often be an estimated cost of the advice process rather than the real commission received. You should be looking at what the cost is to you.

See here, under "investment bonds":

www.fsa.gov.uk/tables

These show full standard terms. The FSA also produce figures that show that the average taken is far below what is shown on those tables. Indeed, you are looking at nearly 40% lower. That means some take more and some take less. Just like any retail product purchased. i bought an item for £553 last week. I shopped around and that was the second cheapest I found. I didnt like the service at the cheapest and the most expensive was over £200 more. Buying financial services is exactly the same. Cheapest not always best and some will be more expensive.

Another thing to consider with charges is that some are explicit, some are not. How much are you charged on your savings account? Most will say nothing. However, the charges are not visible. They pay you 4% whilst making 8% gross elsewhere. Thats effectively a 4% charge. Most regulated financial services products have defined charges so you can see what they are. But dont be fooled into thinking that no explicit charge means it isnt free.