are pensions complicated or what

margaretclare

EdInvestor wrote:

Sure.You could do it now, no need to wait for A-day. Anyone can move a pension into a SIPP, take the 25% tax-free cash and put the fund into drawdown, as soon as they turn 50. The only change to that will be that from A day, you won't be required to take an income from the fund as you are now.

How big is the fund, Margaret? You'd be wanting to move it to a low cost online SIPP with no annual fee, I imagine.There are 3 which are favoured, it rather depends on what you want to invest the money in as to which is best.

Hi, thanks for this

The fund is pretty small, because I only started it 3 years ago. As of Friday close of business it was £8248.57.

I started it when stakeholders were pretty new - up to then I hadn't been able to save from non-earned income and still get the tax relief. I still like the tax relief - paying £156 a month and having the taxman increase that to £200 is still quite an attractive idea!

What isn't so attractive is the thought of being forced into another annuity from 2010.

What I need to invest in are 'ethical' funds, that's why I'm with Friends Provident in the first place. And I completely agree with what Janet Street-Porter writes in today's 'Independent' about Dame Anita Roddick....see
http://comment.independent.co.uk/columnists_m_z/janet_street_porter/article352161.ece

Best wishes

Margaret Clare

EdInvestor

So you're talking about around 6k in the drawdown fund after taking the tax free cash. You could take 516 quid in income p.a. (taxable) from that.

The general idea with drawdown is you take an income from it and the fund keeps on growing, so your income can rise in future.[Though in your particular case, you could just keep it in the cash account earning interest and run it down over a period of years.]

But even if you fancy trying to grow it, funds (or shares) that pay a good dividend income yield should make up a decent chunk of the portfolio, so you don't have to incur extra costs selling bits of your investment to pay your income .

Perhaps 4k could be in income funds and 1k in growth, with 1k in the cash account where interest would accumulate along with dividends from the investments to pay out your income.

If we look at the list of ethical funds here there is quite a decent selection, covering corporate bond income funds (Nos 1,18 have the highest income) equity income funds ( No 10 looks to be the best performer) and growth/tracker funds ( No 26 seems to be doing well and there are also some trackers).

I don't know much about coprorate bonds, so you may like to seek quidance on that aspect from others.The bond market seems to be in a bit of a mess at the moment.

The question then is to check what providers will offer the funds you choose and how much they will charge you for the drawdown ( and if they will take a small amount like 6k.)

The main charges you will pay will be in the funds themselves (the AMC), and any initial charge ( which you would want completely rebated if poss by the SIPP provider).There may also be dealing charges to buy the fund, but hopefully you will only pay these once,if at all.

You should be able to find a SIPP provider with no annual fee, though they might charge you a tenner or so to send you your annual income payment.

margaretclare

Hi EdInvestor, this is really useful.

I thought of doing something like this a year ago. Why I didn't, I've no idea. There was a good reason at the time.

I have a lot more flexibility now. We paid off a loan earlier this year and that frees up £250 a month between us. I now find I have quite a bit more income than I need to spend on living. I'm planning to max out the cashISA in the coming tax year, that will need £230 every 4 weeks (I get the major part of my income 4-weekly, you see, £673.80 landed plop into my current account this morning).

So are you saying I shouldn't pay any more into the pension - leave it as it is at the moment, £8248.57, move it into a SIPP, take 25% tax-free and then invest the remaining £6186.43? I've looked at the list, and yes, number 10 is what I was looking at this time last year. (The £2062 tax-free lump sum will probably get used to replace the asbestos-tiled roof on this 1930s bungalow which has gotta be done before another winter!! Useful, eh?)

I'd much rather have an annual income payment than silly little amounts each month. You'll have gathered - at the moment I don't need any more income, but I'm haunted by the thought that the position could change, that one of us will inevitably be left on his/her own, and obviously that will mean income cut in half. We're never gonna be rich enough to worry about IHT, but we're fortunate compared with some.

SIPPdeal are offering a free establishment before 5th April - normally £100. I've got their forms, am gonna print them off and this time I'm gonna DO IT!

I'll also have spare money if I'm no longer putting into the pension fund and the next thing will be an equity ISA - have been in touch with F&C about this.

Thanks enormously for all your help. There are so few people who can see things from my point of view. 'Why are you saving at your age - most of us can't save, we can barely exist.' I can't ask this kind of question on Age Concern or Help the Aged: they aren't looking at saving and investing at my age, although they do worry about IHT and 'getting the house snatched to pay for care'!!

Thanks again

Margaret Clare

EdInvestor

Hi Margaret


Yes, I certainly think it would be better to save in your ISA than in the pension at your age. You never know, you might need that capital!

I think I would proceed as follows:

1.Open your drawdown account with Sippdeal.

2.Tell FP you are going to take benefits and you want them to pay you the tax free cash and transfer the remainder to your Sippdeal account. ( Sippdeal will charge a fee for sending you the tax free cash, while FP will pronably do it for free, so might as well have FP do it )

Investing the koney once in drawdown

It seems Sippdeal will offer a discount on both the initial charge and on the AMC of the F& C ethical income fund - so you only pay 0.25% initial and 1.35% annual, which is not bad.

This will be a lot cheaper than going direct to F&C. Thus, suggest you invest a chunk of the drawdown fund in the F&C fund and keep the rest in your cash account for the moment.

Also suggest you take your first year's drawdown income in advance, immediately after you open the account.

So that will mean you can get around 2.5k in total out of the pension immediately - just in case the roof comes in more expoensive than expected. You can save any of this that you don't immediately need in your ISA.

We should probably discuss which funds to choose for your ISA, if you put your Sipp money in the F&C one. Eggs and baskets and all that.

dunstonh

It seems Sippdeal will offer a discount on both the initial charge and on the AMC of the F& C ethical income fund - so you only pay 0.25% initial and 1.35% annual, which is not bad.

Ignoring the drawdown side, this same fund can be got for about 0.8% on a FP stakeholder with no initial charge.

If the capital isnt required at all at this stage, then dont do it until it is needed. Whilst drawdown would give you that 25% back, the ongoing investment side would be more expensive going forward.

EdInvestor

DH

What is the cheapest equity ISA provider for that F&C fund?

margaretclare

dunstonh wrote:

Ignoring the drawdown side, this same fund can be got for about 0.8% on a FP stakeholder with no initial charge.

If the capital isnt required at all at this stage, then dont do it until it is needed. Whilst drawdown would give you that 25% back, the ongoing investment side would be more expensive going forward.

Yes, but I do need the 25% tax-free lump sum. DH has some savings to put towards the cost of roof, I don't have to pay for it all myself. And I have some more money due in July and in September.

I tossed around the idea of continuing the stakeholder just for the 22% tax relief. As against that, I like the idea of having more flexibility, more choice, and I really do not want any more annuities. Any annuity now would be tiddly, about £20 a month.

I downloaded the SIPPdeal forms and sent them off today. There are also forms to send to FP, I sent them off as well. Decision is made, no way now but forward. DH and I discussed it - a year ago he wasn't in favour, thought I was being 'too impulsive, leave well alone' - but he agrees, we're in a different financial position now.

Margaret Clare

EdInvestor

EdInvestor wrote:

It seems Sippdeal will offer a discount on both the initial charge and on the AMC of the F& C ethical income fund - so you only pay 0.25% initial and 1.35% annual, which is not bad.

This will be a lot cheaper than going direct to F&C. Thus, suggest you invest a chunk of the drawdown fund in the F&C fund and keep the rest in your cash account for the moment.

If you still want to go with that F&C Stewardship income fund,it would be a bit cheaper on the charges via an ISA with Hargreaves Lansdown than with the SIPP.

https://www.hargreaveslansdown.co.uk

HL will give the same discount on the initial charge as Sippdeal, but will cut the annual charge to 1.19% rather than 1.35%. Also with Sippdeal you would have to pay a 20 pound fee when you invest the money.

So I suggest you go with an H-L ISA for the F&C money and leave the Sipp money in the cash account for the moment (it will get the equivalent of 3.4% interest )and as there are no charges, that's reasonable for the moment.

[DON'T go direct to F&C as you will pay the full charges!]

I will look around and see if there is something more optimal to invest the Sipp money in ( but still ethical).

margaretclare

EdInvestor wrote:

If you still want to go with that F&C Stewardship income fund,it would be a bit cheaper on the charges via an ISA with Hargreaves Lansdown than with the SIPP.

https://www.hargreaveslansdown.co.uk

HL will give the same discount on the initial charge as Sippdeal, but will cut the annual charge to 1.19% rather than 1.35%. Also with Sippdeal you would have to pay a 20 pound fee when you invest the money.

So I suggest you go with an H-L ISA for the F&C money and leave the Sipp money in the cash account for the moment (it will get the equivalent of 3.4% interest )and as there are no charges, that's reasonable for the moment.

[DON'T go direct to F&C as you will pay the full charges!]

I will look around and see if there is something more optimal to invest the Sipp money in ( but still ethical).

Thanks for this - and apologies for having hijacked the original thread. Perhaps we should move this to a thread called 'Pension saving for wrinklies'!

I've looked on the H-L website, but unfortunately, he wants £1000 per fund and £3000 in total. Can't do it at the moment. If I start an equity ISA it will have to be on a 'drip-feed' basis, a few hundred a month, not a grand at a time.

I'm incredibly grateful for all the information, and most importantly, for your taking this concern seriously. So many people just can't understand why I want to do all this. I do agree that my circs are fairly unusual - I'm in a minority of 17% of retired women who get SRP etc in their own right. My DH also has full pensions, SRP + SERPS, but I don't have to receive income through him.

Margaret Clare

EdInvestor

margaretclare wrote:

I've looked on the H-L website, but unfortunately, he wants £1000 per fund and £3000 in total. Can't do it at the moment. If I start an equity ISA it will have to be on a 'drip-feed' basis, a few hundred a month, not a grand at a time.

I think the regular savings ISA bit is here. Must say it's not the must user friendly website I've ever seen, indeed the discounts part is downright confusing.

Anyway probably best to get the Sipp sorted out first. Hope that all goes well