Pension advice IFA

Mirador

Hi there,



Info learnt to date. We have around £200k split roughly 70:30 between us, comprising two DC pensions and stocks and share

It is my intention to take paid financial advice,before making any decision about lump sum, draw down, fund changes, I would appreciate any pointers to reading material which would help. I have started by reading some of the articles on Trustnet and other siteso. Are there any books which could be recommended?

At the same time as looking at the above I need to choose an advisor who can also look at our wider financial situation, including Inheritance Tax planning and again I would appreciate any tips on how to select a suitable advisor, any specific qualifications they should have etc.

Please feel free to ask for any other info which you may feel is needed and thank you for your replies.

dunstonh

I can see straightaway from the work done so far that there are some poorly performing funds in there particularly in the UK All companies sector where annual returns from funds vary from -6.9% to +9%.

Funds or sectors? You say fund but then mention a sector.
Sectors perform differently every year. This is why you diversify. The bottom performing sector last year could be the top performing one this year. This is why you tend not to look at past performance in that way.

At the same time as looking at the above I need to choose an advisor who can also look at our wider financial situation, including Inheritance Tax planning and again I would appreciate any tips on how to select a suitable advisor, any specific qualifications they should have etc.

Nothing you have said indicates any specialist qualifications required. Although G60,J05 or AF3 may not go amiss. However, there are multiple versions of qualifications over the years which do similar things and different exam boards which have different codes. So, you need to be careful filtering exam types as you may eliminate a an adviser that has an equal or higher qualification in a different exam.

gadgetmind

Mirador wrote: »

aware that we would then both have an unused personal tax allowance.

Not using that allowance isn't very tax efficient, so you should take at least your tax free allowance each (remembering BTL income) even if you then stuff it into ISAs.

You also say "a BTL" suggesting more than one, so starting to sell those down makes sense unless you want to be having to worry avoid voids and boilers in your retirement.

232607

Just to comment on reading material.
I've just read a book called Smarter Investing by Tim Hale.
Found it very informative & easy'ish to follow.
Would recommend.

gadgetmind

Yes, that's a great book that covers the basics of investing and asset allocation, but the OPs issue relates to the "de cumulation" phase, how to bridge the gap to state pensions (and some DB pensions?) and how to keep it all tax efficient.

Linton

As you havent given a detailed breakdown we can only comment generally. In my view you are in a pretty good state. You have a wide range of assets and are able to look at the strategic level.

For what its worth I can give you my strategy with a similar sized portfolio....

1) Calculate how much is needed for drawdown each year
2) Keep 3-5 years worth in cash to cover the bad times
3) Hold another 5 years worth in safer investments eg strategic bonds, absolute return
4) Hold the rest in well diversified but higher risk equity
5) Rebalance annually based on underlying asset allocation - I use the Morningstar Xray analysis tools. I think sector allocation is more important than past performance in choosing a fund.
6) In parallel maintain a dividend portfolio to provide a steady-ish income - I would have much greater use of direct income generation investments than you indicate.

With this sort of approach I would guess you would come up with something not too different to your current portfolio, but would have a clear justification as a basis for any changes.

I also hold a over large number (50!) of funds. The main reason is that with multiple investment accounts (his & hers SIPPs and ISAs) allocating specific sectors to individual accounts is a hassle with rebalancing so most accounts hold a bit of everything. If one needs to hold say EM in two different accounts one may as well use different funds. A secondary reason arises from the current use of both high and low fee versions of some funds.

It seems to me that using an IFA to look at things strategically, especially considering inheritance and general tax planning, would be worthwhile. However I assume that you would have no problems with undertaking the ongoing management yourself.

Mirador

gadgetmind wrote: »

Not using that allowance isn't very tax efficient, so you should take at least your tax free allowance each (remembering BTL income) even if you then stuff it into ISAs.

You also say "a BTL" suggesting more than one, so starting to sell those down makes sense unless you want to be having to worry avoid voids and boilers in your retirement.

Thank you, that is what I thought, use it or lose it. We do have another property, but it is occupied by family, no rent charged, so won't be sold. This is a personal decision.and no we don't want BTL hassle so are happy to sell the other property.

xylophone

Re tax and savings income from 6 April


https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293747/Fact_sheet_template_-_10__tax_9.pdf

You won't need to worry about tax on your isa income.

If neither of you have any earned income once you retire the above might be of interest.

Mirador

Thank you for the book recommendation, it sounds a good starting point so I will track a copy down.


Thank you Linton, for your considered and helpful reply,your points in order,

1. £30k per annum.
2. We have cash Isas which would will cover this requirement. They are a 5yr fix at 4.5% with another 3 years to go though.
3. Nothing in absolute return,but have seen an article recommending Invesco Perpetual Global targeted Returns and Newton Real return? Is this the sort of funds you mean? In strategic bonds we have just £5k spilt between Artemis High Income and M&G optimal income.
4. Probably doing that by default!
5. Thank you for the recommendation, I will add to my research.
6. Happy to manage ongoing, once I feel confident that I understand the underlying principles, hence willingness to try and educate myself.
7. Am I right in my understanding that equity income funds are used when core strategy is to try and make money in a flat period, a sort of defensive position?

I expected some flak for having so many funds, so reassuring to know it can also be a planned strategy!
The only area I haven't looked at is the fees and charges, one step at a time, but I have seen articles on this subject which explain the impact of fees on fund growth.

Linton

Mirador wrote: »

Still getting my head around the terminology so apologies if I am confused. We have 10 funds under the primary asset class of Equity Growth and defined as UK All companies, £142k in total. From what I can interpret this category(?) last year returned on average 0.6%, but our individual funds returned from -6.9% ( M&G recovery) to 8.9% (SE Invesco Perp Inc). I can see that past performance doesn't mean that next years will be the same, so I want to read articles which talk about predicted future behaviour not past, if that makes sense. Trouble is, of course everyone has a different view!!

Thank you for the advice on qualifications. I have looked at unbiased.co.uk, but there a lot of IFA to choose from...

The defined asset category is only a very general guide to what a fund invests in. M&G Recovery as its name suggests focusses on companies that are going through bad times and so are at an unusually low price. Invesco Perp Income relies more on large safer companies that pay dividends. In recent years with a general increase in share prices the second class have performed better than the first. So its not (necessarily) that the M&G fund is a bad one compared with the IP fund, its just that they follow different strategies which may be appropriate at different stages of the economic cycle. There is a case for holding both funds but adjusting the %s.

As to predicting future performance - no-one can do it. If people could predict that a particular sector would do well over the next few years they would have already bought into it which would have raised prices now to the point that the expected improvement disappears.

However one can reasonably believe that particular sectors are capable of high performance. Such sectors are often also capable of unusually bad performance. But given that you cant lose more than all your money, and doing that is extremely unlikely with a fund, whereas the value could more than double there is value in using them.

So in constructing a portfolio it is essential that you hold a wide mix of sectors of different characteristics. You need to ensure that you can weather the bad times but take some advantage of the ones that do very well.

mgdavid

Is your £30k p.a. requirement before or after tax?
If you retire will that give you more time to manage and maximise income from the BTL rather than selling it? Thus maintaining income to use against your personal tax allowance. I assume the BTL is co-owned.
You need to be planning fo 30+ years not just 10. Do your 'other pensions' at 65 come to 30k per annum or less?