Pensions, what to do?

Neverland

Autumnrust wrote: »

Also, whats an OP?

OP = original post, person posting #1

bilbo51

mvteng wrote: »

OK, thanks. I've been trying to navigate the FP website for performance data on the funds but can't find it.

Just seen your post - have a look here: http://www.friendslife.co.uk/common/layouts/subSectionLayout.jhtml?pageId=ifa%2FSitePageSimple%3Afunds.prices.pension

The fact sheet pdfs give performance data.

gadgetmind

Autumnrust wrote: »

And because I am an highere rate tax payer, next year I fill out a tax return and get a cheque back for the additional 20% PCM?

You can get it sooner by asking for it to be included in your tax code. I just got a pay packet that included a five figure sum for pension tax relief due to me lobbing in a substantial lump sum prior to any budget silliness.

Does that cheque go in my pocket? Or does it have to go in my pension pot.

Mine goes to Oddbins!

If someone could explain how that process works I would be very grateful.

I have calculated that at present I would like to contribute £600 PCM (pre tax) into my pension fund, so if you could base the example on that it would be really appreciated

Assuming all at 40% tax, and ignoring NI, you get £360 of that £600 in your pay packet.

If you then put £480 into a pension, HMG will add 25%, so another £120 taking you to £600 in the pension. You then get another £120 back in tax, which means it only cost you the £360 you got in your pay packet.

Try drawing a diagram with £600 divided into five lots of £120 (or five quid divided into separate pounds!) and it will make more sense.

In the latter case, you get £3 of the £5 in your pay packet, put £4 into a pension which HMG turn into £5, and you then get another quid back off them.

Autumnrust

gadgetmind wrote: »

You can get it sooner by asking for it to be included in your tax code. I just got a pay packet that included a five figure sum for pension tax relief due to me lobbing in a substantial lump sum prior to any budget silliness.



Mine goes to Oddbins!

If someone could explain how that process works I would be very grateful.



Assuming all at 40% tax, and ignoring NI, you get £360 of that £600 in your pay packet.

If you then put £480 into a pension, HMG will add 25%, so another £120 taking you to £600 in the pension. You then get another £120 back in tax, which means it only cost you the £360 you got in your pay packet.

Try drawing a diagram with £600 divided into five lots of £120 (or five quid divided into separate pounds!) and it will make more sense.

In the latter case, you get £3 of the £5 in your pay packet, put £4 into a pension which HMG turn into £5, and you then get another quid back off them.

Thanks, thats really helpful!

fairleads

Neverland wrote: »

I think the IFA fee is probably in the 2.51%

But nevertheless, if you are expecting to get 5-7% a year from an equity fund that is 40-50% of the returns in fees each year right there

This is the maths that pushed me to trackers and self-investment

In a low inflation- low return world taking advantage of tax deductions and minimising fees is key to building wealth

You, and all the other tracker stalwarts, are missing the point in the tracker vs managed fund debate. In a low return environment, trackers guarentee a low return whereas managed funds have a chance of beating the market and giving a good return. And please guys, don't start quoting Smarter Investing because following that strategy only keeps you behind the herd, not with it even.

gadgetmind

fairleads wrote: »

trackers guarentee a low return whereas managed funds have a chance of beating the market and giving a good return

Yes, they do, or at least a small number of them do.

Choose your lottery numbers with care.

Each to their own.

Neverland

fairleads wrote: »

You, and all the other tracker stalwarts, are missing the point in the tracker vs managed fund debate. In a low return environment, trackers guarentee a low return whereas managed funds have a chance of beating the market and giving a good return. And please guys, don't start quoting Smarter Investing because following that strategy only keeps you behind the herd, not with it even.

Yes managed fees have a chance of beating the market

Unfortunately the higher fees are a continual drag on performance year in year out - particularly in a low return environment

Because there are 00,000s of managed funds its always possible to find a few that consistently beat the index

The chances of you actually being invested in one are quite low unfortunately

If you want high returns and you are confident you can pick a "star manager" why not just select the stocks/bonds yourself?

That way at least you can avoid the drag of the fees on performance

dunstonh

gadgetmind wrote: »

Yes, they do, or at least a small number of them do.

Choose your lottery numbers with care.

Each to their own.

Isnt that the whole issue with investing?

If you go tracker you are accepting you are paying less for mid table performance but consistency. You have effectively assessed the investment potential and cost and made a decision.

if you go managed you are accepting you are paying more for the potential to make more but could make less. You have effectively assessed the investment potential and cost and made a decision.

A tracker is just one investment strategy at low cost. A managed fund is another investment strategy at higher cost (and almost certainly a different risk profile which could be higher or lower then the nearest comparable tracker, if there is a tracker available in that area).

If the tracker and the managed fund share the same objective then its totally daft to go managed. If the objectives are different then you have to decide the potential positives against the potential negatives and make your own personal choice.

gadgetmind

dunstonh wrote: »

If the tracker and the managed fund share the same objective then its totally daft to go managed.

Yes, and this is why I go for trackers for the vast majority of the developed world, most of the pacific, and some EM. I then use active to cover the other areas*, commercial property, infrastructure, etc,

Alongside I use corporate bond ETFs, strategic bond funds, and conviction ITs,

The maths says that I should be getting the returns of an enhanced fund of trackers but with lower fees. It seems to be working well so far.

* I can't be bothered adding it up, but maybe 15% of my portfolio is active. More adventurous and/or younger people might be able to justify 50%. Any more is just crazy talk!

Neverland

I used to mess around with stocks and active funds but I just decided maybe six years ago to use low cost index funds and focus on the overall asset allocation and risk

Being risk adverse and massively underweight in equities at the right times has served me pretty well

I remember looking at FTSE-100 at 7,000 at the end of 1999, while the papers are making a big deal its kicking around 6,000 now...

The expansionary age for Europe is over now....

Asia will grind to a halt in a decade because of adverse demographics...