Investment Fees as a % of Drawdown Income

lejog2003

I never really bothered too much about investment fees until I actually retired and started drawing an income on drawdown. The sums seemed small compared with the size of my pot. Now I'm comparing them to the benefit provided I'm very bothered.

My maximum pension (resulting from a recent GAD recalculation) from a £330k pot is 19k. HL now want to charge me 6.5% of this and fund managers charges make it 10% in total.

I remember HL's Tom McPhail saying that taking the maximum income was not prudent and you should only take 4% of your pot. Being prudent total charges would then swallow up 16% of income.

grey_gym_sock

i doubt that charges as a % of income is the best way to look at it. the fund management charges will hopefully allow the remaining pot to grow, so they don't just relate to the income. HL's charges relate to the tax wrapper - and hopefully the overall tax efficiency of the SIPP makes it worthwhile (and it's a bit late if it doesn't ).

i'd usually suggest drawing the maximum you're allowed in drawdown, unless delaying is likely to mean you'll pay a lower tax rate on it. because it's more under your control outside a pension (and no longer subject to pension charges). that doesn't mean you have to spend it all. spending it all might be imprudent - or might be in sensible, especially if you plan to spend more in early retirement than in later retirement.

lejog2003

I certainly agree that its too late and anyway I got a bargain when my employer contributed 66% of my pension pot and the taxman another 14%.

I agree with you rather than Tom McPhail about taking the maximum income, but then again I've got other income from the tax free lump sum I took and house downsizing, not to mention a State Pension in six years, so I should be able to withstand any crash.

So I'm not moaning, but now I'm actually in drawdown looking at charges as a % of income provided is very much the way I see things. And HL tell me I shouldn't be taking that income, increasing their % take.

kidmugsy

Consider moving to, for example, Alliance Trust Savings. (There maybe others that are comparable, or perhaps better.) Then you could hold, say, 50% equities in ETFs (or Vanguard funds?) with small fund manager charges, and 50% in a long gilt with zero charge. You'd pay ATS £155 p.a. + VAT.

dunstonh

I remember HL's Tom McPhail saying that taking the maximum income was not prudent and you should only take 4% of your pot. Being prudent total charges would then swallow up 16% of income.

There are times taking more is best and times when taking less is best. it depends on your financial position and what you would be done with the money.