Retirement Savings

EdInvestor

jamesd wrote: »

A nice Englishman, see the other side of the HYP. It doesn't match a good equity income fund and as a UK-oriented approach you lose diversification into the global markets.

Jamesd is a bit of a laugh.He compares the HYP with arguably the best fund in the country and finds it's not quite as good (but almost). But note that IP High income is more risky than the HYP - the fund manager holds a lot in cigarette shares and utilities usually.But they are both excellent ways to invest, I certainly have money in both myself.The IP fund also unfortunately doesn't have much of a dividend yield - I prefer to take my income as dividends for free rather than incurring charges by selling shares. The HYP will yield 5%+ income at the moment.

Re global diversification, the other side of that is currency risk (see what's happened to sterling/dollar rates lately?) and higher market risk in the emerging countries.Higher implicit charges are another problem.

Many of the companies suitable for HYP investment are global operators which give you exposure to foreign markets without the currency risk, because a large company (but not a small investor) can hedge against price movements..

jamesd

I compared the prime promoter of the HYP with a good equity income fund and fund that the fund did better. You have te risk the wrong way around: the fund holds many more companies and is less risky than the HYP.

If you're at least as good as the primary promoter of the HYP at picking HYP investments then it can deliver returns that after costs are almost as good. If you don't think you're better than the best, you can go for the fund instead. Or for funds with greater growth objectives, which is what A Nice Englishman is after. UK equity income belongs here as a component, but only as one part.

On what basis do you claim that the HYP will yield 5% income? Comparing income now to the original investment or the usual way it's done, comparing the income now as a percentage of the investment value now? Doesn't really matter, in another discussion I pointed out that the fund could pay as much income as the HYP1 did and also pay close to the first two years worth again because it performed better.

Nice try on currency risk. The FT had a nice story on Friday: Desperate dollar plumbs depths. There seems fair agreement that the US Dollar is under-valued relative to the Pound because of the interest rate differences between the countries. So now looks like a good time to be buying Dollar-based assets - though not US banks. And not necessarily in the US - Hong Kong is also US Dollar pegged, as are various Asian currencies, in effect if not literally. Hence the FT story two days earlier, Bet your bottom dollar on greenback’s potential.

Seen what's been happening to Pound/Euro rates recently? The FT has a nice tool that can show how the various currencies perform. Click on the Macromaps: Currencies picture. It's worth a look. The one year picture shows strong decreases vs the Pound for the US and Indonesia and slight decrease for Russia but strong gains against the Pound for most of Europe, Australia, New Zealand and moderate for China and India. Depending on just how you're invested the currency movements could be in favor or against overall. One thing global investing does do is even out the currency fluctuations of the Pound.

Doesn't matter hugely for A Nice Gentleman with a regular investing plan, though, it'll all even out in the end via Pound cost averaging.

The HYP eligible companies in the UK don't offer substantial or broad international coverage, unless you include the investment trusts with non-UK focus that probably don't meet the HYP criteria. As for hedging, funds vary in how they do it; some do, some don't, others do it if certain limits look likely to be exceeded. Charges are a red herring: the fund performance is after charges. They only matter if they make the performance worse, in this case it still performed better.

HYP is an interesting concept for those who want income and don't like funds. For those after growth or who want the best return after costs there seems no reason to bother with it, since a good fund has done better. There's no reaon to accept second best when you can pick the best instead.

A_Nice_Englishman

Blimey, I have started quite a discussion! A lot of it is over my head at the moment but I do want to try to understand it enough to have a sensible discussion with an IFA and make the right decisions.

My S&S ISA is with Hargreaves Lansdown and as it happens they wrote to me recently inviting me to a Financial Advice Open Day where I could have a 30 minute one-to-one meeting with one of their advisers.

They say "face to face advice works best for those with a combined portfolio through cash, pensions or investments, of over £100,000'. On that basis I don't qualify as my pension investments aren't under my control. Has anyone used HL's advisory services? Can they be recommended for someone who like me who doesn't have £100K yet, but wants to? If HL aren't interested, would other IFAs be?

jem16

From what I remember the advice side of H&L can be quite expensive.

Try speaking to a few IFAs and find out their terms.

johnburman

What ever u do, but extra years in your LGPS.

they will only let u buy a max of 6.66 years at the rate of x yrs per year, between now and 65.

So apply to buy the max of 6.66 BEFORE the 31 March 2008, when this facility is being withdrawn.

Forget ISAs, SIPPS, and other savings until u have done this.

Sapphire

johnburman wrote: »

What ever u do, but extra years in your LGPS.

they will only let u buy a max of 6.66 years at the rate of x yrs per year, between now and 65.

So apply to buy the max of 6.66 BEFORE the 31 March 2008, when this facility is being withdrawn.

Forget ISAs, SIPPS, and other savings until u have done this.

What is LGPS?

dunstonh

LGPS = local government pension scheme

jamesd

johnburman makes a good point.

You probably won't be of much interest to a regular IFA right now but an NMA adviser like dunstonh would look at the long term plan of 700 a year for 13 years and see the rising value of 0.5% commission. That's maybe 10,000 in total commission over the years with 12% or so investment growth. So you might try asking for no initial charge for initial advice and investment selection, with annual rebalancing and investment change advice if a fund manager changes, for just the 0.5% ongoing commission.

If that's not acceptable, perhaps offer 500 fee with 10% of the annual commission rebated to you starting from year 8 as long as you're a customer and the rebate is at least 50, to reduce their risk that you take the advice and walk away. The rebate would be about 50 in year 8, rising to about 130 in year 13. Or 1,000 and 20%, starting in year 6. Someone new to NMA pricing might like this much more.

EdInvestor

johnburman wrote: »

What ever u do, but extra years in your LGPS.
they will only let u buy a max of 6.66 years at the rate of x yrs per year, between now and 65.So apply to buy the max of 6.66 BEFORE the 31 March 2008, when this facility is being withdrawn.

Depends on how much pension the OP already has: trouble is, he needs to fund the 5 years between age 60 and age 65 and this won't help, though it may well be an excellent idea initself.

At this stage IMHO the OP should just max out his S&S ISA through a low cost discount provider, investing either in shares or equity funds or a mixture of both.

https://www.h-l.co.uk is the favoured provider for fund ISAs.

jamesd

It won't help with the five years gap but this once only chance to get the extra LGPS pension years is the sort of thing that makes increasing a mortgage or taking a personal loan worthwhile so you don't miss the chance.