Saving for Retirement-Capital but no Income

Paul_Varjak

No longer wish to disclose personal information

dunstonh

Nice selection of investment funds there. I would go see the iFA that set those up if he/she is local. Otherwise, see another.

What you are asking is a bit too specific for a forum to cover. However, you may not need to do anything or you may just need some tweaking. You could look at pension provision with some of those funds or you may just prefer to utilise the investments as they are. Without the investments, it would almost certainly have made no sense to consider pensions due to pension credit. However, that will be out of the window now as the investment income would take care of that.

We can give suggestions to investigate, comment and debate but on regulated financial products, what we can say would be limited.

Options to consider are. 1 ) buy council house (so no rent to pay ever again). 2) Consider investment funds to suit your attitude to risk and goals 3) place them in suitable investments to meet those goals (that may or may not include pension products).

cheerfulcat

Hi,

I agree with dunstonh, that looks a nice assortment.

Have you used this year's maxi ISA allowance? It might be an idea to move some of the funds into an ISA, if you decide to keep them.

I would also consider opening a Self Invested Personal Pension. Even if you have no income, you can contribute up to £2800 net ( it gets grossed up to £3600 with the tax relief ) per annum. Again, you could move some of the funds ( though this would involve a sale and repurchase, so you'd want to use a discount broker ).

I would be inclined to keep the cash as cash, given that you have so much invested already, but that's just me, I'm quite cautious :-).

If you are interested in shares, you might like to look into the High Yield Portfolio idea, discussed a lot on TMF -

http://boards.fool.co.uk/messages.asp?mid=9158535&bid=51166

also the SIPP discussion board is worth a look -

http://boards.fool.co.uk/Messages.asp?mid=9143189&bid=51267

HTH

Cheerfulcat

Debt_Free_Chick

I think my entitlement to a full state pension when I reach 65 plus the State Second Pension entitlement (because of my disability) will take me above the Pension Credit limit.

Even if it didn't, any lump sum (above a de minimis limit, IIRC) is assumed to produce an income, using a return of about 10%!! So that would disqualify you for Pension Credit under the current rules. And who knows what the rules will be when you retire.

I think you're right to be thinking about securing your income in retirement. If you miss out on a State subsidy, so be it. At least you will still be comfortable.

cheers

dunstonh

LOL - I didn't realise it was you Paul when I answered. I read the post and didnt spot the name attached to it. Hence my relatively generic answer.

Marks and Spencer High Income fund; a top performer with no initial commission so, presumably, virtually unknown to IFAs!

Its not in an sector i deal with much at all. I prefer to stick in the UK corporate bond sector as it is lower risk and generally has similar performance.
M&S funds are now owned by HSBC and after charges, it hasnt been a long term good performer but has has a couple of good years recently. Possibly due to people pulling out of equities and moving into assets in the "UK other bonds" sector. Now that the trend is moving back into equities, that sector may not be as desirable.

Any movement you make into pensions will be limited to your earned income. (or the standard £3600 per annum contribution if no earned income). This may make SIPPs seem initially unattractive as they are designed for higher valuations. It may be worth investigating a lower charge stakeholder for a few years until you build up a fund value high enough to make SIPPs more appropriate. Any movement in that area should be done soon as the stakeholder charge goes up in April from 1.0% max to 1.5% max. Anyone who has a stakeholder prior to that keeps their 1.0%. An annual contribution stakeholder would guarantee your charges.

dunstonh

I am glad you mentioned about stakeholder as I don't really know the difference between SIPP and stakeholder other than with a SIPP you can seemingly select your own investments from a wider range (I think) rather than a more restricted set of funds offered by a stakeholder provider.

Yes basically. However, there are personal pensions that have better charging structures and a much greater fund range than stakeholder.

Stakeholder is low cost with limited funds
personal pensions can be lower cost or more expensive and have a greater fund range.
SIPPs give you more control of the investment options but on paper the target market for these is £50k plus fund values.

I assume that this does not necessarily mean that stakeholder providers will increase their charges though!

It doesnt but all the mainstream providers have already told me that they have no products being launched to take advantage of the higher charge.

I am confused about the Marks and Spencer fund - according to Money Management, it is a top performer over three and five years (after charges) and has been in the top quartile each year for the last four! However, when I did buy into the fund and got info from Marks and Spencer their figures seem more in line with what you are saying!

Its not in a sector with many funds. "UK other bonds" is it's classification. It is ranked 2nd over 5 years. 17th over 3 years. If i stick in a rating over 1,2,3 and 4 years and add in a rating for consistency, then it comes out 16th overall. So it is top quartlie in it's sector. The "UK other bond" sector has outperformed the lower risk corporate bond sector in recent years but as I said before, this is mostly due to demand which is beginning to slow up. Look towards 7-10 years and its nearly all corporate bond that was best. Add in UK equity bond & income sector and they have beaten UK other bonds in the short term and long term.

Over 12 months, the M&S fund is ranked 63rd. Over 2 years it was 57th, 3 = 17th, 4 = 2nd, 5 =2nd. So it is dropping like a stone. However, that is masked by a period of growth.

My software was updated late last week with end of February stats so it is up to date.

This just shows that past performance alone with no other data is unreliable to use.

its a good fund but it is just in a sector that i wouldnt really look at much when building a portfolio. Plus you have the alterations that HSBC are going to make to the M&S funds which may hit short term performance, although short term performance has been poorer than in the past. Perhaps M&S werent spending any money on it in that time because they couldnt afford to or didnt see the need to when they knew they were selling it.

Pal

A question: Are you sure that you have actually inherited those funds?

When someone dies their ISA accounts have to be closed and cashed in because the institution cannot transfer the ISA account to another name. There are lots of FSA requirements regarding "knowing your client", cooling off periods, taking advice and so on.

As a result I would be surprised if the same rules did not apply to unit trusts or other investment vehicles. Or are ISAs different because of the annual investment limits?

Anyone know?

dunstonh

Paul_Varjak wrote:

Even more confused by M&S High Income now. According to Money Management Magazine (February 2005) it is in Fixed Income GBP sector (currently 37 funds)

Performance:
1 Year: Second
2 Years: Third
3 Years: First
5 Years: First

And I am talking positions (not quartiles)

S&P rating - Five stars.

AGR% over 5 years: 10.6% against sector average of 5.8%!

Both Fundtracker (supplied by defaqto) and synaptics fund manager (which users Lipper as the data source) class it as UK Other bonds. Trustnet shows it in IMA Sector: UK Other bond but it is also classified in Fixed Interest sector depending on the data supplier. Financial Express have it classed as UK Other Bond.

Trustnet have it ranked 32 over 1 year, 14th over 3 years and 2nd over 5 years.

Position differences may account for closed funds being filtered out and different days being used to provide the data. In addition, different research companies class it in different sectors. Morningstar have it ranked 6th over 1 year but their classifications are different. The top fund on the other research companies is Artemis High Income. However, morningstar don't class that in the same catagory. Putting the two morningstar factsheets side by side and its clear that Artemis has been the better of the two. However, they wont be in the same list when morningstar is used. Morningstar appear to have no fund data on the M&S funds (like holdings etc) so they could be relying on M&S telling them what sector to place the fund in or it could be best guess.

Morningstar do have more catagories than the others. This makes it easier for a fund to be called top in sector when there are fewer funds in each sector.

cheerfulcat

Pal wrote:

A question: Are you sure that you have actually inherited those funds?

When someone dies their ISA accounts have to be closed and cashed in because the institution cannot transfer the ISA account to another name. There are lots of FSA requirements regarding "knowing your client", cooling off periods, taking advice and so on.

As a result I would be surprised if the same rules did not apply to unit trusts or other investment vehicles. Or are ISAs different because of the annual investment limits?

Anyone know?

Yes, you can inherit a fund, you just lose the ISA wrapper if there was one. You are not (yet ) obliged by law to take advice, thank goodness, and AFAIK the money-laundering rules don't apply to funds. The " cooling off period " only applies when you have been sold a product by an IFA.