Pensions choices: Self confidence vs IFA advice.

crv1963

I'm seeking some advice from the knowledgeable people on the forum please.


In my struggle to work out mine and my wife pensions planning, I've had some really useful help here. I've had some ideas questioned and provided me with lots of food for thought. I have a few further questions though.


Current provision:


Me: NHS Pension 1995 scheme, MHO status- 40/80ths now can take it at 55 (next month) but am planning on working another 3 years for a number of reasons so will be at 45/80ths by end April 2021, given a recent change of role this should give us 23-27k pa, and survivors pension of 11.5-13.5k pa, depending on the number of unsocial hours worked- best year of last three used to calculate the end pension.


This underwrites our pension provision as it's DB.


Wife: 86k Royal London pot
5k NEST paying in 3% currently.


Both get to maximum SP if pay NI until 2021.


Following my heart attack last year- full recovery my GP told me my life expectancy following lifestyle changes (most importantly giving up smoking) is the same as my peers or better (given my stent has improved blood flow and my blood pressure is now controlled!) so about 85 or thereabouts for a 55 year old today.


I had planned to save into a pension for wife, maybe some into a SIPP in my name. I have previously sounded out some of my ideas/ tested them on here as I have been learning and planning. I had planned build a pot for wife start her drawdown up to tax allowance 57-67 then reduce when SP kicks in for her. Accept that I'll pay some tax on my pension from the outset, more when my SP starts.


The whole subject switches off my wifes attention, her interest comes down to the bottom line- how much, when and what is the cost now? This has led me to the conclusion that although I feel confident that I could self manage a SIPP, using Vanguard Funds and drawdown when the time comes. She would not be confident with this, especially if I pop my clogs before drawdown starts or shortly afterwards. I have no illusions that doctors predictions are always right so something could reduce my mortality.


I think it was dunstonh who posted about DIY well and you win, DIY badly and you lose. Therefore giving it lots of thought I've found a local (to us) IFA via unbiased. We've exchanged e-mails and will make an appointment end Dec/ mid-Jan when new earnings total/ off duty gives a clearer idea of what my new salary will be. Base salary is 36k + enhancements + overtime + Bank work (NHS system for staff to work extra shifts where needed).


The questions following my long winded preamble are:


1) Do I simply ask the IFA for a commissioned piece of work- set up a pension for wife and then leave us to it until the point of drawdown, then have another commissioned piece of work to set that up? Or do we have ongoing service? I know lots on here advocate DIY but how do you marry that up with our two different approaches to the subject?


2) We have different risk profiles- she is more cautious than I, so how do we resolve this? I suspect that we should follow our own routes when we set her pension up use her profile, when I save into another pension for me I follow mine?


3) I'd like to look at our savings approach- identify the best way to minimise my tax on retiring, so maybe I should look to S&S ISA instead of SIPP for me?


4) Having not needed to use an IFA for pension planning before due to my DB pension how does it all work?


5) Am I being daft asking an IFA to review our plans?


6) The initial meeting is at his cost where he will outline his fees and come back to us with his suggestions. I understand that this involves him reviewing our objectives and he will have to work out a way to try to meet these and of course expect to pay for his time- he has to earn a living, but what region of fees should I expect?


7) My only previous experience of working with an IFA was years ago sorting insurance, mortgage and S&S ISA out, with biennial reviews, should I expect something similar now?


Sorry if I've given some silly questions but I want to be as prepared as possible to get the most out of the appointment and to not waste his time.

Brynsam

Any decent IFA will offer a first meeting free of charge and I see from point 6 in your question that is the case here. You can't expect actual advice, but what you can expect is feedback on (a) whether it is worth your while proceeding with a full review of your financial situation, including pensions (b) some indication of the areas where the IFA feels they can add value and (c) costs. Many of the points in your question are for the IFA to answer, in very brief general terms, at the meeting - so I'd take a copy of your question along with you.

Make sure you have full details of your investments with you, including (reasonably) current values. A one-page summary would ensure the IFA should be able to manage the meeting to make best use of your time as well as his!

dunstonh

1) Do I simply ask the IFA for a commissioned piece of work- set up a pension for wife and then leave us to it until the point of drawdown, then have another commissioned piece of work to set that up? Or do we have ongoing service? I know lots on here advocate DIY but how do you marry that up with our two different approaches to the subject?

It is what you feel comfortable with. The recommendation on a servicing advice would be expected to be different to transactional advice. The main difference likely being multi-asset fund on transactional advice and bespoke portfolio on servicing advice.

With your value at £85k on existing, it may be more suitable to transactional. Although you are not far off the point that many would offer servicing.

The important thing is to do things right. Whether that be DIY or IFA through servicing or transactional. The rest is a personal choice and what you are comfortable with given your own situation.

2) We have different risk profiles- she is more cautious than I, so how do we resolve this? I suspect that we should follow our own routes when we set her pension up use her profile, when I save into another pension for me I follow mine?

A discussion is the first thing. Her being cautious could well be linked to lack of knowledge and understanding. So, if she is willing to discuss and learn a little then that may change. If she is really switched off for it, then either you agree that you make the investment decision or accept that she prefers her own level.

3) I'd like to look at our savings approach- identify the best way to minimise my tax on retiring, so maybe I should look to S&S ISA instead of SIPP for me?

A few years ago it was pension to use up personal allowance each and then ISA above that. Now it is not so much the case as a pension is better than ISA for the basic rate band in retirement as well now. (tax relief on the way in on the full amount but taxed on the way out on 75% with 25% tax free. ISA gets no relief on the way in and no tax on the way out. So, pension is better there. Plus, pensions are outside of the estate if IHT is likely to be an issue at some point).

4) Having not needed to use an IFA for pension planning before due to my DB pension how does it all work?

You let the IFA guide you. IFAs should be able to adapt to the needs of the person. It could range from a complete handover to the IFA with you really showing very little interest at one end through to you having detailed discussions and understanding every decision that is made. You are the client so you decide the level of engagement that you want. You won't be asked what level you want. It will just naturally develop over the initial meetings and time. Communication is the key to any successful adviser-client relationship.

5) Am I being daft asking an IFA to review our plans?

No. A provider that caters for advised and DIY clients has said that advised clients end up with higher pension pots than non-advised. Their reason given was the advised clients put in more money than non advised. This is because an adviser will say what is needed or encourage you to pay what is needed. Whereas DIY, you have to work that out and decide and its easier to persuade yourself to pay a lower amount. Indeed, some will just pay a nominal amount and tick the box "pension done". Again, this all comes down to you and what you are like and what you need.

When I bought my first house, we had a small garden. I did the gardening myself. When we bought our current house, it had more land and I didnt have the time to do as much gardening. So, I paid for someone to do it. Not because I couldn't do it but because a) I didnt want to and b) time. We are about to move to a place with 8 acres and all sorts of land issues. So, I will be employing someone a bit more advanced than a gardener. Same reasons as before but also things are more advanced now and outside of my ability. I could learn and possibly do well or bodge and do badly. I choose to employ someone instead. That is very much like using an IFA. You start out small and its easy to DIY. Then you move on and you are busy on other things and you start having to think and learn about fine-tuning. Still possible but more of a choice. Then ultimately, there comes a point where a professional really does make sense but you could still DIY if you wanted. You are more in the medium stage now.

6) The initial meeting is at his cost where he will outline his fees and come back to us with his suggestions. I understand that this involves him reviewing our objectives and he will have to work out a way to try to meet these and of course expect to pay for his time- he has to earn a living, but what region of fees should I expect?

You rarely get any advice following the first meeting. It is usually a getting to know you chat. A discussion on general objectives and a few concepts and ideas to see if both sides feel it is good to progress beyond that point or not.

Fees are where you will see big differences between firms. Advice firms are not all equal. Some target market high net worth. Some target the mainstream. Some only want ongoing servicing. Some dont are more general practitioner and do everything. So, a firm that wants high net worth is likely to price you high as they dont really want you. Some may be totally greedy. Some will be good value. Just the same as in all walks of life.

7) My only previous experience of working with an IFA was years ago sorting insurance, mortgage and S&S ISA out, with biennial reviews, should I expect something similar now?

Most IFAs don't do mortgages and insurance any more. They leave that to the mortgage advisers. It is difficult to be a Jack of all trades nowadays and there is little point having investment class authorisation if you are mostly doing mortgage class or insurance class. So, you tend to find firms have split different adviser types in their firm or access to them if they are very small firms.

MiFID II (EU regulation started this year) says that reviews must be at least annually. So, biennial is out. However, a review is not defined as to what it is. So, if your needs do not involve much change from the earlier year, it may be that a portfolio rebalance and investment selection review is all that is needed that yet. If you are on multi-asset funds, then you may question the need for ongoing servicing. If you are on a bespoke portfolio then you need it (unless you DIY - as any bespoke portoflio whether advised or DIY does need to be kept under review and rebalanced). So, yours may be a chat/conversation and portfolio review each year until you have a particular event coming up that needs more. Again, these things adapt to what you want and need.

Sorry if I've given some silly questions but I want to be as prepared as possible to get the most out of the appointment and to not waste his time.

Nothing silly there at all. Some of these would be good for you to put to the adviser to see what they say. Remember the point I made about adviser firms having diferent models. You want one that fits you. You dont want to be the type that has to fit the adviser.

crv1963

dunstonh wrote: »

A discussion is the first thing. Her being cautious could well be linked to lack of knowledge and understanding. So, if she is willing to discuss and learn a little then that may change. If she is really switched off for it, then either you agree that you make the investment decision or accept that she prefers her own level.



My wife has told me that she would prefer to be guided over risk and amount to save. We will listen to the advisor suggestions, she knows that her preferred method of cash saving is not a good one for a pension.


You let the IFA guide you. IFAs should be able to adapt to the needs of the person. Communication is the key to any successful adviser-client relationship.

Agreed, clear communication avoids misunderstandings in all walks of life.

Fees are where you will see big differences between firms. Advice firms are not all equal. Some target market high net worth. Some target the mainstream. Some only want ongoing servicing. Some dont are more general practitioner and do everything. So, a firm that wants high net worth is likely to price you high as they dont really want you. Some may be totally greedy. Some will be good value. Just the same as in all walks of life.

I have experienced that this week. One advisor I contacted told me that the minimum amount he advised on was 250k - 1% for the review and advice, therefore his fee would be far higher to us in terms of value for money as it would be a waste to pay him this amount £2500 for what we are looking for. I thought at least he was honest to me.

Most IFAs don't do mortgages and insurance any more. They leave that to the mortgage advisers. It is difficult to be a Jack of all trades nowadays and there is little point having investment class authorisation if you are mostly doing mortgage class or insurance class. So, you tend to find firms have split different adviser types in their firm or access to them if they are very small firms.

Now I understand his comment that they have others in the firm if we needed advice about mortgage and insurance.

Nothing silly there at all. Some of these would be good for you to put to the adviser to see what they say. Remember the point I made about adviser firms having diferent models. You want one that fits you. You dont want to be the type that has to fit the adviser.

Thank you dunstonh and Brynsam for your swift comments, they certainly will help us.

cfw1994

Some sense spoken there, as always

One thing I would suggest (& I'm someone who currently does not use an IFA, so take this with appropriate seasoning!): in your shoes, I would arrange to see at least 2, or ideally 3 IFAs.

That way you will have things to compare, and I suspect you may find one who stands out as being the best for you.


My analogy would be this:
3 years ago we had some building work done. Got an architect to draw up plans, he then recommended 3 builders to quote.
One was very local, & we kind of assumed he would likely be the one we would chose.
In the end, all 3 came round: the resulting quotes were actually all very similar - around £60k.
2 (including the local one) provide multi-page quotes, but they both missed off some relatively important pieces of our short spec: underfloor heating, some electrics.
The 3rd appeared better at understanding our expectations when we met him, gave a 1 page quote which summarised everything, and was priced in the middle: we chose him, and got the quality of work we wanted - a great experience all round!
(& we have since recommended him to 3 friends who have also had good work!)
If I'd picked the local fella, we would have ended up paying more, regardless of whether the work was as good.

Like I say, I still am considering our situation and 'managing' our finances, but I suspect I am a bit more anal and detailed than many & could be hard to please....perhaps I need to visit 5 IFAs !!

Good luck!

crv1963

cfw1994 wrote: »

Some sense spoken there, as always

One thing I would suggest (& I'm someone who currently does not use an IFA, so take this with appropriate seasoning!): in your shoes, I would arrange to see at least 2, or ideally 3 IFAs.

That way you will have things to compare, and I suspect you may find one who stands out as being the best for you.

Good luck!

Thank you, I like the comparison to the building works! I did speak to another, who was clear that our needs were below the level of finance he would normally deal with but would meet if I'd pay the level of fee he normally expects, so took his advice and looked elsewhere.



There are several firms locally that advertise as Finance Planners/ Pension Planners and Wealth Managers but I looked through unbiased and not all were listed.


We'll meet the one I've exchanged e-mails with and see how it goes, if we get along okay then great. He may tell me that my original plans meet our needs or come up with a different view and point out something obvious to an IFA that I'm going about the wrong way.


My comparison is I have a bag of spanners and can change a wheel but it doesn't make me a mechanic. The same with our retirement planning, I can read, plan and maybe even dabble but at the end of the day Mrs CRV is right- I might understand the principles but she takes her car to the garage to be serviced as they know what they are doing.

cfw1994

That is a fair view.
I'd personally still want to know I have another perspective....if the car needs a new engine, I'd certainly be calling around, but the analogies kind of fail there: 30+ year finances are a little.....nebulous and less scientific than building an room or servicing a car, those things only carry short term fiscal pain!

Of course you can always return here and get vague views of strangers on the internet: surely the most useful thing you can do :rotfl:

Good luck!!