Wealth at Work Investment Strategy

chris1955

I'm due to take early retirement from BT at the end of February and will be drawing my pension immediately. I'm 55 years old and as well as drawing my pension I am lookng to invest my Pension Lump Sum of approx. £125K. BT has engaged a company called Wealth at Work (formerly JP Morgan Invest) to provide employees with some retirement planning workshops and there's then an option to have an initial free one to one with one of their advisors. I've done this and am thinking of using them to create my investment strategy but I've a couple of questions:
1) Has anybody any experience of dealing with Wealth at Work and if so what was your experience and would you recommend using them?
2) Their initial charge for setting up + designing a portfolio is 2% + VAT for the first £100K and then 1% + VAT on the next £200K. For the ongoing management of the portfolio including further advice there is an annual charge of 0.5 to 1.5% + VAT. Do these charges seem reasonable?

dunstonh

2) Their initial charge for setting up + designing a portfolio is 2% + VAT for the first £100K and then 1% + VAT on the next £200K. For the ongoing management of the portfolio including further advice there is an annual charge of 0.5 to 1.5% + VAT. Do these charges seem reasonable?

Typically you would be looking for an IFA to do the same or similar at around £1000-£2000 and 0.5%. Some will obviously be greedier than others.

Are you looking for an IFA investment portfolio or a discretionary investment management portfolio?
What are they offering for that 0.5%? For example, would it include annual bed&ISAs etc or would that cost more on top of the 0.5%

Loughton_Monkey

I have no axe to grind here. I am not an IFA, and don't use them much myself, having early retired from a career in Financial Services.

They have presumably worked well at a high level with senior BT people to obtain such a lucrative 'intro' to a large number of relatively wealthy early retirees. They will be 'investing' their time in a number of seminars, documents, and 'free' one-to-ones quite freely since when they 'make a sale' it is extremely lucrative - especially at the rates you have quoted.

As a retiree myself, I believe 'Retirement Planning' to be a very wide subject, and one that should be done properly and in the right order. And I think I would give you a 'headline' piece of advice straight from the shoulder. Here it is:

"You have 35 or so years ahead of you. A mere 3 to 6 months is absolutely 'nothing' in the whole scale of things. So do not, repeat not tie yourself up with (a) specific costly investments, or (b) potentially costly servicing contracts, with anyone, until you have prepared a thorough cash flow plan yourself and have understood the basics of Investments, Savings, and Tax."

With a pension that size, you are obviously intelligent enough to do a rough plan yourself - on a spreadsheet - with information you already have, and with a bit of research on this (and other) web sites.

• Write down all the 'cash' you currently have. [Including the extra tax free lump sum]
• Write down what BT pension you are going to start getting
• Write down any other pension income you may have (if any)
• Write down what your State Pension will be and when you start getting it.
• Do the same for your wife (if exist)
• Critically examine your spending and write down how much you need/want to spend in retirement to maintain an adequate lifestyle.
• Make reasonable assumptions for future inflation
• Investigate and assume how much you can earn on 'cash' savings (currently 3 to 3.5% if you are very lucky)
• Assume how much you can get on 'equity' investments (probably between 5% to 7% depending upon several things)
• Investigate ISA's and understand the contribution limits, and tax implications.
• Investigate tax rates on income and unsheltered interest.

You get the idea...

Now you will be able to put this together and see what sort of income/expenditure applies for the next 30-odd years, allowing for inflation, and will greatly inform you about whether you have enough to start splashing out £15K a year on a glorious holiday, or whether you can just maintain a 'decent' lifestyle, or whether you run out of cash completely at age 70 with just an inflation-eroded BT pension covering 50% of your spending....

So now you will be reasonably well informed. You can test for yourself the financial dynamics in putting your money into 'safe' accounts that wont lose money, but will erode in value, and in putting it into equity investments where there is risk, but better returns longer term. How resilient is your plan. When are you likely to need the savings - so how long can different tranches be tied up. How long is it going to take to get more into tax shelters....

If you do this, I think you should find it rewarding. You might learn a bit, and now I would suggest you can become a reasonably sophisticated buyer. You can then find an appropriate local, and hopefully recommended, IFA who can fill in a lot of gaps with you, help validate your strategy, and talk about specific providers for appropriate investments.

Sorry for length, but I sincerely feel you could be making a big mistake to listen to these guys. THere's a strong chance you would be back on these posts in a couple of years "..I invested in these JP Morgan funds and quite frankly, I am appalled....."

chris1955

Thanks for the feedback guys. There are a number of things for me to think about and questions to ask the advisor when I meet him in a couple of weeks time to discuss things more fully.
I will also arrange to contact a local IFA and meet with them to discuss things.

swaledaleslots

Hi Chris, I also work for BT & hope to retire next march to use the 3 year pension advantage period which enables me to retain the pre 2009 rights. I have been on the W&W 'fun day' and left feeling very wary about the whole process. The first warning signal was when they said that there would be no material to take away or copies of the slides, then they said that BT had asked them to do the presentations ( presumably to get people to leave without any financial enducement). The whole spiel seemed to be about why we 55 plus people were still working at all ( from a financial persepctive anyway). I have read the packs sent out by W@W & their charges seem very high, no risk to themselves obviously, and following a 1-1 meeting with their advisor, I still feel I am being pushed down a one way path as far as investments are concerned. They are very good salesmen, as were the people who sold me endowments over the past 25 years, so I'm afraid I may leave my lump sum in cash, or just spend it. At least I can't blame anyone else if things don't work out

dunstonh

They are very good salesmen, as were the people who sold me endowments over the past 25 years, so I'm afraid I may leave my lump sum in cash, or just spend it.

That sort of comment doesnt help anyone and certainly doesnt help yourself.

Endowment sellers from 25 years ago are very different to investment firms of today. If you want to suffer shortfall risk and inflation risk because of misguided opinions then that is your choice. However, it would be unfair on others reading your comments if they thought what you were saying was a sensible option.

Loughton_Monkey

swaledaleslots wrote: »

..... They are very good salesmen, as were the people who sold me endowments over the past 25 years, so I'm afraid I may leave my lump sum in cash, or just spend it. At least I can't blame anyone else if things don't work out

OK, it's good that you have spotted that this route is not the optimum one perhaps.

But I find it rather less perceptive to spend all the money or keep it in cash.

Certainly, there are several people, sadly, who have bought a car from Arthur Daley, some Double Glazing from Ripemoff, Bodgit, and Runne Ltd. and maybe took their children to Lapland Park for Christmas.

This does not mean that they should never buy a car, never improve their house, or entertain their children.

You are more than welcome to join the "Cut off one's nose to spite one's face" club, but this forum (and others) exists to try and guide people to sensible solutions - to avoid the situations that some have experienced.

As you yourself have admitted, when you retire and it's all too late to earn more or invest, you will only have yourself to blame.

property.advert

dunstonh wrote: »

.............. Endowment sellers from 25 years ago are very different to investment firms of today..........

Sure, but at the time they were touted just as fee charging IFAs are today. Only hindsight has altered our perception of what they were.

I wouldn't be rushing into anything quite so quickly as those who are out to benefit from the decision would like the OP to decide.

jamesd

There's no rush and it's good to see whether you're more comfortable with a different IFA. Nothing at all prevents you from using several or visiting several before picking one.

With a £125,000 lump sum to start with the first thing you'd be looking to see them doing is telling you that you should be trying to use your full ISA allowance of over £10,000 a year to get it into the ISA tax wrapper as fast as possible, perhaps using the allowance of your spouse if any as well so it can be done more quickly. Stocks and shares ISAs offer the most popular of the investment options available within a pension but pay out interest from funds that produce that with no tax deducted and have better tax treatment for everything else as well, compared to outside an ISA or pension.

You can also recycle some of the lump sum into new pension contributions and gain some tax benefit from that if you don't mind losing immediate access to some of the capital to increase taxable income. There's a rule limiting how much can be recycled from a tax free lump sum but no harm to put in a few tens of thousands to use the clearly safe limit.

Getting advice on how to invest the money is a good thing. Might be the case that these aren't the best advisors but taking advice if you don't already know what to do is the right idea.

dunstonh

Sure, but at the time they were touted just as fee charging IFAs are today. Only hindsight has altered our perception of what they were.

Endowments spent more of their life paying surpluses than shortfall. Endowments were a victim of the changing economy. However, those changes made virtually everyone better off. It people had increased the amount they paid into the endowment when interest rates fell to compensate then there wouldnt have been the problem. However, most pocketed the money and spent it. Endowments showed that having a strict product that you cannot move around or adjust (in many cases) was not a good idea as things do change. That is why most modern investments are so flexible.

Endowments were touted frequently. Which? had best buy endowments. The media frequently recommended endowments. Martin, had he existed back then, would have an endowment best buy section now. The changes that occurred were not easily seen until the mid 90s. Hindsight is wonderful.

Loughton_Monkey

Endowments bought in the 70's were absolutely excellent value. Tax relief for a while and very good returns. Although I never actually used mine to pay off the mortgage, they could have done qith very large surpluses.

Trouble is, they assumed interest rates in the ball park of 7% to 9%. When mortgage rates started plummeting, averyone with a mortgage had 'never had it so good' - forgetting that 'repayment' mortgagess still had to pay their capital and often paid it back at a higher rate. Interest Only merchants should have put some of the windfall into extra investments. But they spent it and then whinged that the 'obvious' had happened.

However, their 'Hay Day' was back in the times that Mortgage Interest obtained 100% tax relief, and Endowments contained 50% tax relief. Interest only plus an endowmment was a no-brainer. Trouble is, once tax relief was eventually withdrawn, they continued to be sold despite them being of very marginal benefit.