Investing a lump sum to generate retirement income - do I need to use an IFA?

gadgetmind

The up front fees are perhaps reasonable, but 1.4% ongoing for what's likely to be a low return portfolio wouldn't appeal to me.

jamesd

rudebhoy wrote: »

it does appear to have performed well consistently and the risk rating is low, which was why I was attracted to it

http://www.moneywise.co.uk/fund-information/Pru-PruFund-Growth-Fund-Pn/DBFS2

I don't believe that chart. It's too flat for the investments contained in the fund so I think that there is either missing data for many periods that produces a straight line over the missing periods or there is something being hidden in smoothing results before they are published. And indeed, I find that's true, from Prudential's funds page: "PruFund Smoothing - how does it work? PruFund funds are invested in Prudential's With-Profits Fund". They periodically adjust the price and that's why you see occasioanl jumps. But such funds tend to have a market value reduction when sold at times when the markets are down, though I don't know this range in detail.

If the IFA showed you that graph and said that's the underlying volatility to expect, I think that you were misled.

To get a bigger view and a comparison take a look here. Now in the upper right clock on choose an instrument and pick the Index choice. Highlight the FTSE All Share from the list of indexes and click on add instrument button. That compares this fund to the main UK market. In the timescale section choose the "choose own" choice and enter 28/11/2008 as the From date, leave end date changed and click on update timescale button. The start date is around the time the fund was launched. Now compare total growth and look in the table further down to see the cumulative and year by year performances.

Now choose "Other fund" from the investments list and choose Vanguard Investments UK Ltd as the manager. Pick the three Vanguard LifeStrategy funds that have 80%, 60% and 40% Equity, choose Acc(umulation) types. Observe how the ups and downs in the chart vary depending on how much is in equities. Also notice that the time period was reduced because the Vanguard funds were launched relatively recently.

Now add the fund Invesco Perpetual Monthly Income Plus No Trail Acc and observe that it has delivered better performance without excessive volatility. For your income purpose you'd really select the Inc version but I didn't pick that because the total returns comparison would be misleading because the income portion wouldn't be included in the chart.

Now remove the Vanguard funds to get a longer time period in the chart. Compare the performance and the volatility. Notice that the Invesco Perpetual fund shows more of the real volatility but less than the FTSE while having perfrmance mid way between the two.

All performances there will be after fund charges but before platform of IFA charges.

rudebhoy wrote: »

he gave me a projection where income drawdown would pay out more if we lived to our late 80s, it was pretty marginal and I couldn't see the point in taking a risk when I didn't need to.

What projection rate did he use? I'm asking because Prudential themselves say 7.70% for this fund before inflation and I assume before costs. The main UK market is about 8-9% by that measure.

What you can do is pick a mixture of funds to achieve any overall volatility pattern that you like. for example you could and should really add a UK commercial property fund to provide more diversified income from that instead of bonds.