£10k inheritance

ColdIron

zagfles wrote: »

You can't put more than your earned income gross into a pension

You can with carry forward if you haven't maxed out your previous 3 years allowance

atush

8K into your pension, 2K into a S& isa, or 2K extra into Wife's pension.

zagfles

ColdIron wrote: »

You can with carry forward if you haven't maxed out your previous 3 years allowance

No you can't. The earnings limit (100% of earnings/£3600) can't be carried forwards.

We have this discussion on the pensions board regular as clockwork, there's a lot of misinformation out there.

HardCoreProgrammer

I do not know how the charging structure of the IFA, but I feel that you have been given inappropriate advice:

1. You are on a low income, so your savings may be low. By putting the money into a pension, you cannot access it even in an emergency for at least the next 20 years.
2. Don't forget that while you get a tax credit while you pay into a pension, you may have to pay tax when cashing out. You have a low income paying 20% tax, so you get 25% tax credit, which will be wiped out if any future withdrawal brings you above the income tax allowance.
3. As others pointed out, the ongoing adviser fee will eat into the returns. If current predictions are correct, returns in future will continue to dwindle and this 0.75% will become more of a drag on returns.
4. The IFA mentioned management fee, but not "platform fee" if using a SIPP (e.g. Hargreaves Lansdown charges 0.45%).
5. Did the IFA ever mention a LISA (where you get the same tax credit but do not have to pay tax when cashing out, unless tax rules change)? This should be a more appropriate option because you can access the funds in the next 20 years if needed (although you will lose the tax credit in this case). If the answer is "no", I would not touch this IFA with a bargepole.

Please ignore the advice to put it into a pension. It is not appropriate even if there is no adviser fee to pay. Open a LISA and buy some cheap tracker funds. If you do not need the money in the next 20+ years, you gain 25%. If you do need the money, you are no worse off than putting it into an ISA anyway.

kidmugsy

If you plan to wander through life in low-paying, self-employed work, then a pension is a decent idea because you may well end up drawing money down tax-free by use of your Personal Allowance. But I don't see any need to rush the decision: you are at least 20 years away from being able to draw the money down. Why not use an ISA now, with a view to moving the money into a pension later? Or even use a LISA and move the money into a pension at age 60? That latter scheme sounds good. Even if growth only equals inflation, then in real terms:

£4k -> £5k -> £6.25k. Trebles all round.

As for "a fund management fee of 0.8% and an ongoing adviser fee of 0.75%", pah! And pah again. Phooey. baloney. Not on your nellie.

JNW1918

Thanks everyone. Seems as though my scepticism was well founded. I'll ignore the IFA's advice and proceed as above!

zagfles

HardCoreProgrammer wrote: »

I do not know how the charging structure of the IFA, but I feel that you have been given inappropriate advice:

1. You are on a low income, so your savings may be low. By putting the money into a pension, you cannot access it even in an emergency for at least the next 20 years.
2. Don't forget that while you get a tax credit while you pay into a pension, you may have to pay tax when cashing out. You have a low income paying 20% tax, so you get 25% tax credit, which will be wiped out if any future withdrawal brings you above the income tax allowance.
3. As others pointed out, the ongoing adviser fee will eat into the returns. If current predictions are correct, returns in future will continue to dwindle and this 0.75% will become more of a drag on returns.
4. The IFA mentioned management fee, but not "platform fee" if using a SIPP (e.g. Hargreaves Lansdown charges 0.45%).
5. Did the IFA ever mention a LISA (where you get the same tax credit but do not have to pay tax when cashing out, unless tax rules change)? This should be a more appropriate option because you can access the funds in the next 20 years if needed (although you will lose the tax credit in this case). If the answer is "no", I would not touch this IFA with a bargepole.

Please ignore the advice to put it into a pension. It is not appropriate even if there is no adviser fee to pay. Open a LISA and buy some cheap tracker funds. If you do not need the money in the next 20+ years, you gain 25%. If you do need the money, you are no worse off than putting it into an ISA anyway.

You are worse off, as there's a 6.25% exit penalty (on top of loss of the govt bonus) so you'd be better off with a normal ISA if you need the money before age 60 or to buy a house.

A_T

JNW1918 wrote: »

Hi
My concern is that with a find management fee of 0.8% and an ongoing adviser fee of 0.75%, once inflation has been factored in, the investment really wont grow that much in real terms. In fact in Aviva's key facts document they estimate that with a 2.1% growth, once fees are taken out and inflation factored in, the £10k will be worth £11k in 30 years!

For that I would demand an advisor with a crystal ball!

If you intend using it to save for retirement I would put it in a SIPP - assuming you meet the requirements.