Investment Trusts V pension

hilsea

I am currently saving with F&C, I invest £60 into F&C investment trust and £60 into British assets Trust and a further £50 into Capital and Inc Trust each month. I have currently accumulated £14,000 in share value


I also have two pension funds which I contribute £50 a month into for both funds.


The total of the pension fund pots currently sits at just under £30k, until recently I was seriously considering stopping paying into the pension funds due to the likely small pot I would accumulate and also the low annuity return I would receive. However due to the pension reforms the options are now more attractive.


I am 53 years old, my question is should I continue investing in the investment trusts or should I put my spare cash into the pension schemes (both are managed fund stakeholder pensions), my goal is at 60 to either take the dividend payments from the investment trusts as income (the trusts currently pay a healthy yield) or take lump sum from the pension and use for income particularly for the likely 7 years I will need to wait for my state pension from 60.


I have cash ISA's and also NHS pension for when I reach 60 to enable me to retire at 60, but with the pension changes I am questioning whether my savings / investment strategy is the best way forward,

dunstonh

Investment Trusts V pension

That is like saying petrol vs car. Or tea vs cup.

I am 53 years old, my question is should I continue investing in the investment trusts or should I put my spare cash into the pension schemes (both are managed fund stakeholder pensions), my goal is at 60 to either take the dividend payments from the investment trusts as income (the trusts currently pay a healthy yield) or take lump sum from the pension and use for income particularly for the likely 7 years I will need to wait for my state pension from 60.

One assumes you have the investment trusts in an ISA (if not, then why not?). If you like investment trusts then why not have them inside the pension too?

At the moment, you appear to be comparing the tax wrapper with an unwrapped investment and that is not logical as you will get the same return in a pension, ISA or unwrapped if you use the same investment. The only difference will be tax and maturity method.

talexuser

You don't mention if you have maxed out the NHS pension, but I would do that first as it is one of the best around and will pay your nominated partner after you have gone?

atush

You haven't had to buy annuities for some years now.

Put some of the 14k into pension and all further savings into pension. Move what is left of the inv trust into ISA if not already there?

Basically 80 into your inv trust is 80, but 80 into inv trust inside your pension is 100.

jamesd

You can sell the investment trusts outside a pension, contribute the money into a pension and get the tax relief, then buy the same trusts again inside the pension.

The requirement to buy an annuity first ended in April 2006 when Alternatively Secured pensions were introduced. Assorted changes since then have led to announcements that there is no need to buy an annuity any more to help people to learn about this change. The major change from April 2015 is to remove the restriction on how much can be taken out at once, going up from 25% plus about 6-7% a year at your age to all of it.

If you are working and want to retire sooner you could tell us all of your assets and how much minimum income you need and we could give you some idea of how long before your state pension age you could retire. We'll also need to know about any work pensions and when you reach state pension age, which is some time after 60 for woman and after 65 for men at the moment.

hilsea

Thanks for the replies. So I should really be adding to my personal pensions with my available savings of £270 a month and stop investing in the investment trusts. I currently have the inv trusts in a savings plan which costs me £40 plus vat charges from f&c per annum. If it were in an isa that would be £60 plus vat pa, up until a year ago the savings plan was free which is why years ago I started it up as I thought the isa charges for my then investment of £100 per month was too high.

F&c offer a pensions product with their trusts but the charges on that look even higher plus a £110 start up plan charge, perhaps I need to look elsewhere.

atush

If you have emergency savings elsewhere, then use the F&C plan to put into a pension now. AS their yearly charge is better value if buying and selling.

Do the other 2 trusts charge annual fees? If not, you can keep them outside for medium term needs. Or sell and rebuy inside a cheaper ISA.