Pension panic

Friendly_Bob

dunstonh wrote: »

It may be worth asking IFA 2 if they will take the fee from the product

Am I correct in assuming that you meant to say "IFA 1" in the quote above? (seeing as you said that you thought it was probably worth walking away from 'IFA 2').

I have appointments with another 2 out of the remaining 3 IFAs on my shortlist, and the information that you have provided will help me to ask them the right questions and make more of an informed choice. Thank you. :beer:

dunstonh wrote: »

Transact is expensive on small contributions (regular with no existing fund for example). Its great for large values and is only one of a few personal pensions that allows direct investments as well as funds.

I will be making my pension contributions in lump sums (most likely annual one-off payments) because, due to the way that I get paid it, it's not practical for me to pay a regular monthly amount.

So does that mean that I shouldn't dismiss Transact out of hand if it's offered to me by another IFA? (subject to reasonable yields). I'm wondering whether it might be considered overkill for someone as clueless as me.

I've just checked an online contribution calculator (on Unbiased's web site) which says that my pension contributions (including tax relief) should amount to £41,680 per annum. However, I am worried by comments I've read on this forum saying that tax relief on contributions may well be scrapped. If this were the case then it would put me in a very difficult position seeing as I only have 13 - 15 years in which to contribute before my preferred retirement age.

Obviously the growth of the pension pot will play a vital role, and here is where I really get totally out of my depth, because having never had much in the way of disposable income before now, I've never paid the slightest bit of interest in how investments and things like that work. Is it even vaguely reasonable to work on the basis that I might be able to achieve 5% growth, or is that too optimistic?

Friendly_Bob

EdInvestor wrote: »

What are their investment proposals for the funds?

OK, this is all pure gibberish to me, so I'll just copy it verbatim.


Fund

Allianz RCM BRIC Star fund
Std. = 1.75% ....Disc. = 1.25%

BlackRock UK Special Situations
Std. = 1.5% ....0.75%

Gartmore Cautious Managed Retail Class
Std. = 1.25% ....Disc. = 0.63%

Invesco Perpetual Distribution
Std. = 1.375% ....Disc. =0.68%

Investec Cautious Managed
Std. = 1.25% ....Disc. = 0.63%

Jupiter Merlin Balanced Portfolio
Std. = 1.5% ....Disc. = 1%

Legal & Gen All Stocks Index Linked Gilt Index
Std. = 0.2%....Disc. =0.2%

Thames River Balanced Managed Fund
Std. = 1.5% ....Disc. = 1%

Thames River Global Boutiques Fund
Std. = 1.5% ....Disc. = 1%



On FSA 2's scale (from 1- 10) I described myself as '4 Cautious to Realistic'.

I am naturally quite risk averse and would normally tend go for the safest option. However in this instace I do appreciate that in order to get a reasonable amount of growth in the current climate that I will need to be exposed to a bit of risk.

Having said that, seeing as I have no family whatsoever, or anyone else to fall back on for assistance if things go wrong (and I'm not young enough to have time to build the fund back up if significant losses are incurred) then it does make me want to opt for pretty safe investments. This is my last chance to provide for myself in old age and so I am not really comfortable risking the capital just to get increased income levels over and above what I may need.

dunstonh

Am I correct in assuming that you meant to say "IFA 1" in the quote above? (seeing as you said that you thought it was probably worth walking away from 'IFA 2').

Must have meant that.

So does that mean that I shouldn't dismiss Transact out of hand if it's offered to me by another IFA? (subject to reasonable yields). I'm wondering whether it might be considered overkill for someone as clueless as me.

I doubt you can get an efficient reduction in yield on transact until you get to a larger investment amount. It is overkill for the inexperienced investor. You are not likely to use its features. So, you will end up paying extra for something you are not using. At your age, a decent personal pension should do the trick. It will balance the cost efficiency with the access to funds.

I've just checked an online contribution calculator (on Unbiased's web site) which says that my pension contributions (including tax relief) should amount to £41,680 per annum. However, I am worried by comments I've read on this forum saying that tax relief on contributions may well be scrapped. If this were the case then it would put me in a very difficult position seeing as I only have 13 - 15 years in which to contribute before my preferred retirement age.

Thats a good contribution and suggests that Transact could be an option in 5 years time or thereabouts.

Higher Rate Tax relief is only rumoured to be on the decline. The Govt has already put one cap in place with it. The reason the rumours persist on further drops is that the NPSS/Personal Account scheme being introduced in 2012 has no provision for higher rate relief. It doesnt actually cater for basic rate either unless you stick with the default contribution level. Is the Govt likely to allow personal pensions keep their Higher rate relief where their own scheme doesnt? Hence the rumours. If it does get removed then you just look to the other tax wrappers and maybe still pension to some extent.

I've never paid the slightest bit of interest in how investments and things like that work. Is it even vaguely reasonable to work on the basis that I might be able to achieve 5% growth, or is that too optimistic?

This is where you really want a servicing adviser and not a transactional one (servicing means reviews, rebalancing portfolio etc whereas transactional only looks at point of sale and then not again). If a cautious portfolio is built then 5% is a realistic expectation. If medium risk then 7% is realistic. If high risk then 9% is realistic. However, the further you move up the risk scale, the more volatile the valuations will be from year to year. Investments are about potential. Some people can handle the volatility with the view its long term. Others panic at a small loss and forget it zig zags. Its really personal preference and remember that 5, 7 & 9% shown are just examples using straight line growth figures. Investments dont work that way. In some periods you will get less than that, including losses and in some periods you will get more, sometimes a lot more.

EdInvestor

What percentage of the money is to be allocated to each fund?Does it vary between funds?

robefc

I've skimmed the thread so apologies if I've missed it but have you mentioned asset allocation anywhere? And if not has the IFA mentioned asset allocation to you at all?

You've listed the funds but what's far more important is the spread between different asset classes - between fixed interest, property and equities and looking in more detail, different geographical stock markets, large and small companies, government and corporate bonds etc etc.

If you can show us that information we could give you an idea of whether it's a reasonable asset allocation for the risk profile you've mentioned.

In addition, how did you use the calculator from unbiased? Did you assume a given growth rate and a target income and it gave you a required annual contribution?

Lastly, pensions aren't the only answer, they're a tax wrapper, so if the proposed changes for tax relief affect you all is not lost, you simply choose another tax wrapper (e.g. ISAs) or none at all (simple unit trusts).

Actually this is lastly (!) - the second IFA pushed commissions because he could see how he could make a lot of money out of you, I'm sorry to say people like that exist in the industry. The first IFA apparently is/was not willing to give you advice without being paid for it which I think is perfectly fair. However, he should give you an idea of how he and his firm work so that you can make a judgement about whether they are the right firm for you..

Cheers

Rob

EdInvestor

robefc wrote: »

You've listed the funds but what's far more important is the spread between different asset classes - between fixed interest, property and equities and looking in more detail, different geographical stock markets, large and small companies, government and corporate bonds etc etc.

If you can show us that information we could give you an idea of whether it's a reasonable asset allocation for the risk profile you've mentioned.

Quiote so.Unfortunately no less than 5 of the funds are balanced or cautious managed funds containing a mix of differtent asset classes.Frankly this does not inspire confidence in the IFA's investment skills or ability to set up a portolio with a proper risk related asset allocation.

http://www.citywire.co.uk/adviser/investments.aspx

The OP could try looking up the funds listed on this website to see how they have performed.