Need to take out a pension with a particular ethical fund in mind. Help please.

Izzy_Skint_2

Hi all,

I have listed 20-30 funds into the performance fund screening facility at morningstar.co.uk and have determined that Henderson Global Care looks a very good fund for me to invest in.

I am looking to take out a pension type investment in this fund. How do I go about it? Do I go by a pension discount broker.

I am currently in a final salary scheme via my employer, the Police, but I want to take out a pension type investment to give me the option of retireing earlier should I want to.

Many Thanks

Graham

dunstonh

How do I go about it? Do I go by a pension discount broker.

To get access to that fund you will need a fund supermarket pension or a SIPP. I dont think it is available on any mainstream personal pensions. So, you can diy with this one.

However, you should note that single fund investing is poor quality investing and will result in lower returns over the long run as you have your eggs all in one medium/high risk basket. You are also compromising the potential for investment returns by choosing an ethical approach. So, make sure that you really are up for those sacrifices.

Izzy_Skint_2

Thank you Dunstonh. In that case, on average how many funds would you say are necessary to self-invest in in order to get as good an average return as possible?

Many thanks.

Izzy_Skint_2

Can I also ask, I'm having soem problems getting my head around the "guaranteed income" aspect of a pension. My works final salary scheme guarantees me an income until retirement. If I were to take out a SIPP or an AVC would they also guarantee me an income until I die and if so, if I live to 100 would this mean that the annuity provider would be out of pocket as they would have had to have paid for me in retirement for so long?

Again, many thanks.

dunstonh

In that case, on average how many funds would you say are necessary to self-invest in in order to get as good an average return as possible?

It depends somewhat on what sort of investment strategy you use. However, different regions of the world will perform differently at different times. You also have to consider your risk profile. 100% into global equities could lose 50% in 12 months potentially. Are you up for that sort of risk level?

If I were to take out a SIPP or an AVC would they also guarantee me an income until I die and if so, if I live to 100 would this mean that the annuity provider would be out of pocket as they would have had to have paid for me in retirement for so long?

If you purchase an annuity, the income is guaranteed for life. If you go with an unsecured pension (income drawdown in its old name) then the income could fluctuate and go down as well as up. The income is based on the amount in your pot when you get to retirement and that is subject to investment returns.

Ian_W

Izzy_Skint wrote: »

I am currently in a final salary scheme via my employer, the Police, but I want to take out a pension type investment to give me the option of retireing earlier should I want to.

Hi Graham,
Not an expert but a couple of points on this in particular:
1. If you're a member of the 2006 police pension scheme you can draw your pension from age 55 according to THIS - para 4.1. From 2010 you won't be able to draw a private pension earlier than 55, so how does a private pension allow you to retire earlier?
If you're a member of the earlier [1987] scheme you can draw that from 50 so it's even less valid to take out a private pension to retire earlier.
2. Whilst you get tax relief on your pension payments there are currently tax penalties if you "over-pension" which kick-in by reducing the quite substantial age allowance at about £22Kpa income when you're over 65. Given that both the police schemes are quite generous [though the latter one much less so!] have you considered whether using your full S&S ISA allowance might not be a better bet? Without an employers contribution, I'd be interested in dunstonh's thoughts as to which might be better - given that the ISA route gives you full control of the capital to use as you wish, tax free.
HTH.

dunstonh

Without an employers contribution, I'd be interested in dunstonh's thoughts as to which might be better - given that the ISA route gives you full control of the capital to use as you wish, tax free.

You know my view on this as its in the ISA vs pension thread. Higher rate relief is the only thing that may offer it as best option (depending on overall provision). Or if there is a spouse/partner it may be better to use them to ensure full utilisation of personal allowances in retirement.

Izzy_Skint_2

Chaps,

Thanks for your reply and interest. Ian, I'm in the 1987 scheme and I understand your comments regarding being able to retire at 50. I will check with my pension administrators to make sure that is the case.

Regards the whole Pensions Vs ISA debate (sorry Dunstonh, I know a well trodden path for you) am I missing something here? If I take a pension product and hence buy an annuity when I retire, and the annuity providers guarantee me an income to when I die and again, I live to 100, surely this is a very good reason for taking an annuity, because if I were to, say, be receiving a guaranteed income from them for about 40 years of retirement, surely I would be eventually taking more money from them in income than what I had in my pot when I bought the income.

I guess the question that stems from that is how do annuity providers calculate your guaranteed income when you buy the annuity?

Thanks again

Graham

Ian_W

Izzy_Skint wrote: »

Ian, I'm in the 1987 scheme and I understand your comments regarding being able to retire at 50. I will check with my pension administrators to make sure that is the case.

No need to, the details are HERE. With 30yrs service you can retire - with an immediate rather than deferred pension - before 50, with 25yrs service at 50 [or above] and in most other cases at 55 whatever your service.
The point being that a private pension won't enable you to retire earlier as per your 1st post AFAI can see.

I'll duck the annuity question as there are people with far more expertise in this than me, other than to state the obvious, that if you don't live to be 100, or anywhere near, the insurers could end up gaining.

Most folks we are told are under-provisioned for pensions but you can be over-provisioned as well and end up losing out fairly punitively on tax "age allowances" if your pension [and other taxable] income exceeds £22Kpa. That's why it's worth considering ISAs as pensions investments once you've established a certain level of pension income. Income you take from ISA's isn't taxable whereas pension income is.
Don't make the mistake of thinking that because you get tax relief on the way in pensions are always the best form of retirement savings, often they are - sometimes they're not.

All of course IMHO.

EdInvestor

You don't have to put your money in a pension to get a guaranteed annuity income for life.Indeed if you save in an ISA you can get a higher income on retirement by buying a "purchased life annuity", a product which receives favourable tax treatment, and pays out better than a standard annuity from a pension fund.

Re the tax age allowance issue, what is the projected level of your police pension at retirement?

dunstonh

a purchased life annuity should be better value than a lifetime annuity but the tax relief on the pension contributions, even at basic rate, makes pensions better. However, you can take a fixed regular withdrawal from ISAs as well and as long as the amount is sensible you should never have a problem.