Do I really need a IFA?

jaycay

A private pension has been transferred from my ex-husband into my name which is a stakeholder pension plan. The Provider has strongly recommended I seek advice from a financial advisor. I have had an initial consultation with a IFA, who was suggesting giving advice for savings, etc. I have not committed yet to the IFA. Could anyone please tell me whether it is important that I do have an IFA? My income is not great am I am trying to hang on to my money but don't know whether it would be foolish to not consult one. I'm 55 and in employment.

atush

What is the size of the pension pot? Do you have a pension of your own as well (with your current employer?) do you pay tax> sdo you have other savings and investments?

You need money to retire on, and need to save them somehow.

jaycay

Hi - thanks for your response. The cctv is 85k, plus I have 41k in a frozen pension. I have a small amount of savings in an ISA. I am concerned about finances when I retire and where best to invest or save money for retirement. I was hoping to save the cost of a financial advisor but wonder if it will be money well spent in the long run.

jaycay

forgot to mention - yes I do pay tax

dunstonh

Could anyone please tell me whether it is important that I do have an IFA?

You can rule out FA and rule out most places going direct. That just leaves you DIY and IFA. If you can DIY and do it well then it can be well worth it. If you DIY and make a pigs ear of it then it could be a very costly mistake. Its just like any other area when it comes to DIY.

If you were to DIY, which provider would you use? How would you invest?

plus I have 41k in a frozen pension.

it wont be frozen if it has a fund value.

CannySaver_2

Hi

To be honest it comes down to your own experience and expertise.

If you have the time, knowledge and experience then the DIY can be rewarding and save you the IFA fees. I know plenty of investors who are at least as knowlegeable as the average IFA when it comes to investments.

However, if are an inexperienced investor and do not have the time or inclination to learn then maybe some advice is required.

There is always the half way house option, why not get an IFA to manage your pensions, which are large and you are clearly nervous about, and you manage your ISAs which are smaller and where you can do less damage if you get it wrong. Over time you could get the IFA to manage your ISAs if you are not comfortable, or you could take the management of the pensions over from the IFA if you decide you know what you are doing.

Hope this helps.

The Canny Saver

atush

I agree with most of what has been said. But you do need to save more, as 126K in pensions and a 'small amt' in an ISA won't give you great comfort in retirement (but you will not be on the breadline either).

So, do you have a home and a mtg? Do you have a pension with your current employer? Is your small amt in an ISA enough for 6months living expenses should you be made redundant?

If you have a mtg you could consider saving further by overpaying to finish it earlier. Having a home to live in rent free at retirement always makes life easier. If you don't have a pension now, your employer will have to offer one int he next few years so find out (if they do or when they will) and join it. If you don't have 6months spending in cash, address this first before opening a personal pension or other investments.

You seem to at least be in a good position going forwards, but an IFA could help you sort out your 2 pensions (ie make sure the charges are low and you are happy with the funds they are invested in etc) and could help you with further planning. Or you could do the planning for yourself using all the advice above. IFAs can be paid by fee or comission and I rec the fee model so you can ask for a quote.

jamesd

Since you appear to be unfamiliar with investing the use of an IFA found by personal recommendation or unbiased.co.uk seems wise. Shop around. Charges and services vary.

Overpaying on a mortgage makes you poorer long term compared to investing because investments can be expected to make more than the mortgage interest cost. Mortgage overpaying is popular among those with a short term view that ends before retirement or who want a very low risk option.

You should get a State Pension Forecast if you haven't done that yet. It'll give you some idea of what you can expect from the state pensions. Probably £6,000 or so a year. A capital amount of £85,000 could provide perhaps £4,250 a year and the 41k deferred pension would add something more, perhaps use £1,000 for planning purposes if you don't have a number from that scheme. So you may have an income of about £13,250 a year in retirement given your current situation but it could be a few thousand lower.

atush

Overpaying on a mortgage makes you poorer long term compared to investing because investments can be expected to make more than the mortgage interest cost. Mortgage overpaying is popular among those with a short term view that ends before retirement or who want a very low risk option.

While I agree with most everything you have to say lol, I don't with this. I think it is a good way, alongside of other ways of saving as it leaves you more flexibel when you come to sell or remortgage. But agree that to do only this is not the best way forward. For instance, I use this for less than 20% of my savings outside of pensions- probably closer to 10-15% as I engage in more risk with my non cash savings in this pool so it all balances out.

dunstonh

At the moment, I am overpaying my mortgage, have increased my pension contributions and of course maximising S&S ISA allowance. Its not a choice of one thing only but a spread of options.

jaycay

Thanks everyone for your advice. I am self-employed and run a small business with partners and don't see any concerns for future business. I just have the 2 pensions I mentioned. I have to sell the house I am in as part of the divorce settlement but hope to be able to buy something smaller mortgage free. I could frugally live for up to a year on my savings. I don't have any experience in investing/pensions so I think I will take your advice and put it in the hands of an IFA as I do not have the time to research this myself. Can anyone please advice me what would be a good price to pay? One FA told me he takes 5% at a rate of 1% per year if the value is under £100K and 7.5% is over £100k. The pension was being managed by an IFA when in my ex-husband's name but as it has been transferred as a pension in my name this no longer applies.

PS I apologise for my ignorance - I thought a FA was the same as an IFA