Internet chaps down the pub investment opinion required

Matt002

Following on from my finding an IFA thread here:
https://forums.moneysavingexpert.com/discussion/5693550

One poster suggested posting up what I am looking to invest and asking for some advice from the internet chaps down the pub that are you guys on here.

So a brief summary...
I'm 38, no dependents
Pension fund 1 is currently 100k in a FTSE all share tracker fund with 1% AMC which I pay around 8k a year in to
Pension fund 2 is a Nest 2047 retirement fun which my employer pays 2k a year in to.
I have about 50k in cash savings 30k of which is in a cash ISA at 1.36%
Mortgage is paid off
I now have roughly 2k a month to invest

My plan was to leave 10 to 15k in cash as an emergency fund and then move the cash from the ISA in to some form of s+s ISA then worry about the pension stuff later. As to what S+S ISA i assumed it would be some kind of tracker but I haven't yet done the research, I have seen VLS 100 mentioned quite a lot so was going to look at that.

I guess the question is what would you do in this situation and please don't say see an IFA. I probably will seek out some pro advice but I would just like to hear how the masses would go about investing this.

System

At the moment, you are only invested in the UK equity market (although there is some global exposure through UK-listed multinationals) so diversification would be a good idea eg. a global tracker. Pensions are often the most tax efficient way of saving, but it depends on your reason for saving.

aroominyork

If you are saving for a pension, the key issue is whether you are now a 40% taxpayer. If you are, SIPP is much more efficient that ISA since every £100 you pay in costs you £60 after reclaiming the tax. Assume (for this brief post) that you are a 20% taxpayer after retirement: you save 40% tax now but pay 20% when you withdraw in retirement = 20% gain. With an ISA you pay no tax now or later so it is a zero sum game, hence SIPP wins by 20%.

Many readers will cringe at the assumptions and generalisations in what I've written, but it's a starting point for you to think about tax.

I need to edit this because I explained ISA wrong. You pay in today after tax but pay no tax when withdrawing. So after earning gross £100 you pay £60 into ISA but it is tax free when you withdraw it, hence (before appreciation) you start and end with £60, whereas with SIPP you pay in £100 after reclaiming tax but then pay 20% when you withdraw, hence £80 net. I again give the health warning about over-simplification.

Matt002

Thanks chaps. I am a higher rate payer. The main reason for saving is to reduce my retirement age and because I can't think what to spend it on...

DireEmblem

Just a thought but why not use your savings and your 2k a month to get a second property to let? That way if something happens, you can still afford to pay the mortgage, but ultimately the rent should cover the payments and maintenance?

Bit boring I know but just a thought!

Also your tracker sounds expensive - 1% ACD fee for a FTSE tracker fund???

Voyager2002

First point: you are paying far too much for that pension (1 per cent for a tracker!) and that is something you can fix quickly and easily.

Second point: you are far too biased towards the UK. As for sectors, I would suggest looking at different things that are fairly high risk, but move in different ways: Russia; Technology; Emerging Markets... some of these investments will be disasters but some will pay off handsomely.

Third point: we are well into a dramatic 'bull run' (less so this week) so bias your choices towards those sectors that are out of fasion, and so might not have so far to fall when the inevitable correction comes. In this respect I would look very carefully at price/earnings ratios. On this note you could look at Russia (again); Brazil and Latin America; and the industries around agriculture.

DiggerUK

zzr-matt wrote: »

...........I would just like to hear how the masses would go about investing this.

You say you are happy to finalise pensions later. Unless you are in final salary schemes, don't invest.
If you do decide to go down that route, don't put anything in till you are 53. As rules stand today, you can usually get your contributions refunded in the first two years. Then at 55 you can take the pension. This allows a bug out option if needed, something you do not at present have because you can't access until 55. Rules are varied and change, so do your research.

Diversification is a management speak buzz word, same as portfolio management. Looking at your 'portfolio' I see cash getting less than inflation, that needs attention now. Your emergency fund is too low in my opinion. With interest on easy access so low, why not have fun with Premium Bonds.

Digger Mansions is an under 60 free zone, and all our easy access is in physical gold. I would strongly advise you to research gold. We would be in a better position if we had bought a little gold more often and earlier. Our experience is that averaging in to gold over time is the best plan; we averaged in, in a little over10 years..._
http://goldprice.org
http://moneyweek.com/beginners-guide-investing-in-gold/

dividendhero

zzr-matt wrote: »

Pension fund 1 is currently 100k in a FTSE all share tracker fund with 1% AMC which I pay around 8k a year in to

That's a very expensive tracker, on 100K you're paying £80 a month in charges - Legal and General's all share tracker is about a tenth of this cost.

still not convinced? assuming 5% growth over 20 years - the 1% charges will cost over £40,000 in charges

kidmugsy

Wot the hell, I might use a cheap global equity tracker - or perhaps two, on the principle of "just in case". I'd perhaps add to that some precious metals and some index-linked bonds: I'd guess that an ETF of (US) TIPS might be my choice, since index-linked gilts are excruciatingly expensive. Consider whether you want to hedge the exchange rate risk.

The actions that would reward you most quickly are (i) dump the 1% AMC, and (ii) avoid more 40% tax.

ColdIron

zzr-matt wrote: »

Thanks chaps. I am a higher rate payer. The main reason for saving is to reduce my retirement age and because I can't think what to spend it on...

Then pension should be high in your priorities. You are giving away £400 of every £1,000 earned in that bracket and you could get it all back

Matt002

dividendhero wrote: »

That's a very expensive tracker, on 100K you're paying £80 a month in charges - Legal and General's all share tracker is about a tenth of this cost.

still not convinced? assuming 5% growth over 20 years - the 1% charges will cost over £40,000 in charges

So how would one go about say moving the pension to legal and general? Would that be doing a SIPP with someone like Hargreaves Lansdown or Interactive Investor?

I see here: http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/legal-and-general-uk-index-class-c-accumulation the L+G charge is discounted to 0.06% but then here http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates/1 HL add a fund holding charge charge of 0.45%.

If I understand correctly, the same thing from interactive investor would be 0.1% AMC and a flat fee of £80 per year (0.08% on 100k / 0.04% on 200k) so a fair bit cheaper than HL.

Is there any more protection leaving things with Reassure who its currently with v moving to these other chaps?

Obviously I'm green to this so I am just trying to understand how things fit together at the moment.