Pension/investment advice

Trinity_Phil

Cheers for your input Mark....some stuff there a bit over my head, but I think the gist of what you are saying is don't rush to re-locate the wife's pension ??
Our advisor has looked at it and said that for the last few years, Royal London haven't been paying any dividends/bonuses (??) so that's why he is recommending the Pru pension instead but this doesn't look a good option to us ??
What are your thoughts on the Pru ISA's and the fees involved in maintaining them ??

Trinity_Phil

Okay, so I've just had a lengthy chat with my step-dad, who is reasonably clued up on these things ..(but no expert by his own admission) and from the outset he has been very sceptical about using a financial advisor for our affairs saying "they will advise you until all your money has gone and still charge you for the privilege !!" and I have to say that now we have got some figures through, I can see where he is coming from.
It has taken me 30 years to accrue my pension and as I have said from the outset, I don't want to lose it and with the way things are at the moment, I do not believe it is a good time to be looking to invest my hard-earned cash due to the volatility of the economy, brexit etc etc.
He is suggesting putting the £40k into premium bonds as they have a similar amount in there and usually average at least one £25+ win every month, sometimes more,until the whole brexit affair is over and things settle down, and then re-assess it then.
I have to say that this option appeals to us far more than risking losing some/all of our capital AND having to pay someone for the privilege of doing so !!
What are peoples thoughts, please ??

crv1963

Trinity_Phil wrote: »

Okay, so I've just had a lengthy chat with my step-dad, who is reasonably clued up on these things ..(but no expert by his own admission).

It has taken me 30 years to accrue my pension and as I have said from the outset, I don't want to lose it and with the way things are at the moment, I do not believe it is a good time to be looking to invest my hard-earned cash due to the volatility of the economy, brexit etc etc.

He is suggesting putting the £40k into premium bonds as they have a similar amount in there and usually average at least one £25+ win every month, sometimes more,until the whole brexit affair is over and things settle down, and then re-assess it then.

I have to say that this option appeals to us far more than risking losing some/all of our capital AND having to pay someone for the privilege of doing so !!
What are peoples thoughts, please ??

I've re-read the thread, and think if you are not comfortable with the risk of investing at the moment then probably it sounds like a reasonable compromise to park it in Premium Bonds until the dust settles a bit.

I still stand by my much earlier post that putting some into a SIPP in your wifes' name is a good idea, she will get the uplift from HMRC, and there is nowhere you'd get an equivalent interest rate on savings and as she is over 55 can take the TFLS straight away to put into Premium Bonds if that is where you want to park your money.

mark55man

Trinity_Phil wrote: »

Cheers for your input Mark....some stuff there a bit over my head, but I think the gist of what you are saying is don't rush to re-locate the wife's pension ??
Our advisor has looked at it and said that for the last few years, Royal London haven't been paying any dividends/bonuses (??) so that's why he is recommending the Pru pension instead but this doesn't look a good option to us ??
What are your thoughts on the Pru ISA's and the fees involved in maintaining them ??

I was saying don't take it out of being a pension, but a transfer from one pension vehicle (ie Royal London) - into another pension vehicle (ie anything else you might consider) eg Hargreaves Lansdown.

remember you need to separate the financial investments from the financial mechanism. Pension freedoms made it easier to transfer (at least made it more talked about) Old style pensions (ie Royal London) seem to do their best do make this hard. I have no idea if the funds chosen by Royal London are good for you or not, but I suspect that given likely nature of fees and lack of incentive you could probably do better. And one way of doing better is (STILL WITHIN a pension) to choose a low cost provider and invest in low charge funds -eg Vanguard.

Cheers and good luck with you future and good luck with your premium bonds (I hope you are one of the lucky ones whose returns outstrip inflation leaving your money able to buy as much in 10 years as it is now)

DairyQueen

I am finding it tricky to summarise your's and wife's pension arrangements and current decisions. Could you please confirm:

- You have a police pension payable soon. What decision did you make regarding annual income and lump sum?
- Your wife has a DB which will pay £15,000p.a. Is that the projected value at scheme retirement age, or the current value based on service to date? When will it pay?
- Your wife has a DC valued at £20,000-ish in a legacy scheme? Poor performance and high charges very likely. Transferring this is likely to be a good decision, notwithstanding checking any safeguarded benefits (like a GAR). Assume your IFA has already checked that no safeguards apply given that s/he recommended transferring.
- You have a cautious (very) attitude to risk.
- You will have no debts (you will use the police TFC to pay-off mortgage, etc.)
- Are you and spouse on course to qualify for max SP? Have you both received SP forecasts?
- Do you have any emergency cash on instant access? If not, had you earmarked any of the TFC for this purpose?
- Does your wife work? Is her DB associated with her current employment?
- Any other savings/investments (you/spouse) in addition to the pensions and the TFC you have chosen to receive?

Sorry if this info is available throughout the thread but it would be quicker for you to provide in a single post than read several pages.

Trinity_Phil

Mark, thanks again for taking the time to reply, it's very much appreciated.

DairyQueen....
I have gone for option 3...133,225k lump sum and 19,983k annual pension
The wife's old pension (with Royal London) is worth £21,900 total (not annual !!) and her current pension is worth C.15k. and is payable in 11 years when she reaches 67.
I've no idea what a GAR is ??
I've no idea what DB and DC are either ??
We are using £35k from the lump sum to pay off the mortgage.
We both qualify for full SP.
We would be looking at retaining approx £15k for emergency cash (that would be a big emergency I know !!)
The wife DOES work part-time and earns c.9K p.a. and is paying into the 15k pension pot.
We do not have any other savings/investments.
I told you I was new to all this investment stuff !!! :embarasse:embarasse

DairyQueen

Trinity_Phil wrote: »

Mark, thanks again for taking the time to reply, it's very much appreciated.

DairyQueen....
I have gone for option 3...133,225k lump sum and 19,983k annual pension
The wife's old pension (with Royal London) is worth £21,900 total (not annual !!) and her current pension is worth C.15k. and is payable in 11 years when she reaches 67.
I've no idea what a GAR is ??
I've no idea what DB and DC are either ??
We are using £35k from the lump sum to pay off the mortgage.
We both qualify for full SP.
We would be looking at retaining approx £15k for emergency cash (that would be a big emergency I know !!)
The wife DOES work part-time and earns c.9K p.a. and is paying into the 15k pension pot.
We do not have any other savings/investments.
I told you I was new to all this investment stuff !!! :embarasse:embarasse

I think you are making good progress in understanding this maze we refer to as 'pensions'. It takes time and effort to understand exactly what pensions you have, let alone decide how you should manage your hard-earned money in retirement. Informing ourselves is probably the best thing we can do so you are a lot further along than the majority who are deterred by the sheer complexity.

Thanks for summarising. That makes things much clearer.

One question I forgot to ask.... Have you calculated how much income you and spouse will need when both of you are fully retired? This is usually step 1 in retirement planning. A very rough guide would be two thirds of after-tax household income, net of mortgage, commuting costs and cost of supporting kids.

Otherwise, a good place to start is to check out 'The Number' thread. Lots of good info there:
https://forums.moneysavingexpert.com/discussion/2146737/pensions-planning-the-number&highlight=my+number

By the way:
Defined Contribution (DC) pension schemes are those that do not pay an annual pension but build-up a pot. Your Wife's Royal London is a 'DC'. Defined Benefit (DB) schemes are those that pay you an annual pension (plus an optional lump sum on commencement). Your police pension is a DB. These acronyms are used to differentiate between the two most common forms of pension.

GAR = 'Guaranteed Annuity Rate'. No need to define that one as it doesn't appear to apply to you.

Anyway, back to the subject of your post.

So, in today's prices:

You will receive around £20k inflation-linked annually from your police pension (today's prices). Plus you and wife will both qualify for full SP (approx £8,500 currently). So that's around £37k in gross annual income (at today's value) guaranteed and index-linked.

Very nice too.

Plus your wife has circa £22k + £15k = £37k in her 'pot' (currently held between two 'DC' pension providers).

Plus you have your tax free cash (less mortgage), of approx £98k. After house improvements and helping kids, you will have around £15k emergency cash plus £40k to invest somewhere?

You and spouse both plan to continue working part-time until SP kicks-in and will be earning around £9k each p.a. in today's money?

Have I got that right so far?

Sorry to ask so many questions. I just want to make sure I know enough before making suggestions that would be wrong for your circumstances.

mark55man

GAR - Guaranteed annuity rate - a valueable promise that when you cash in your money you will get at least X. The value is that X is significantly above today's market rate (which is significantly below what the companies thought!)


DB = Defined Benefit = Final Salary = although you may have contributed this is valueable as you don't have the risk or hassle of working out how to generate your income it just turns up - an dis normally well protected against inflation and possibly with money (often half) for your OH if you pre decease her. Taking it early is normally allowed but often reduces how much you can have (acturial reduction).



DC = Defined Contribution = Money Purchase = Here you are responsible for building and then generating income from a pot of money. The risk is all yours. However, it can be more flexible in that currently you can access it from 55 so allows a more tapered retirement


With respect to your OH, if she is earning then even if she does not pay tax on the money it counts as taxable income. If she puts this into her pension she would receive a 20% uplift as that's the way it works. So even if you leave it in cash or cash like investments you get a guaranteed hike of 20% (which is she doesn't pay tax on it on the way out is good. Even if she does pay tax 25% is tax free (ie 5% return on your money for no risk - even if she takes it straight out again)

Trinity_Phil

DairyQueen wrote: »

I think you are making good progress in understanding this maze we refer to as 'pensions'. It takes time and effort to understand exactly what pensions you have, let alone decide how you should manage your hard-earned money in retirement. Informing ourselves is probably the best thing we can do so you are a lot further along than the majority who are deterred by the sheer complexity.

Thanks for summarising. That makes things much clearer.

One question I forgot to ask.... Have you calculated how much income you and spouse will need when both of you are fully retired? This is usually step 1 in retirement planning. A very rough guide would be two thirds of after-tax household income, net of mortgage, commuting costs and cost of supporting kids.

Otherwise, a good place to start is to check out 'The Number' thread. Lots of good info there:
https://forums.moneysavingexpert.com/discussion/2146737/pensions-planning-the-number&highlight=my+number

By the way:
Defined Contribution (DC) pension schemes are those that do not pay an annual pension but build-up a pot. Your Wife's Royal London is a 'DC'. Defined Benefit (DB) schemes are those that pay you an annual pension (plus an optional lump sum on commencement). Your police pension is a DB. These acronyms are used to differentiate between the two most common forms of pension.

GAR = 'Guaranteed Annuity Rate'. No need to define that one as it doesn't appear to apply to you.

Anyway, back to the subject of your post.

So, in today's prices:

You will receive around £20k inflation-linked annually from your police pension (today's prices). Plus you and wife will both qualify for full SP (approx £8,500 currently). So that's around £37k in gross annual income (at today's value) guaranteed and index-linked.

Very nice too.

Plus your wife has circa £22k + £15k = £37k in her 'pot' (currently held between two 'DC' pension providers).

Plus you have your tax free cash (less mortgage), of approx £98k. After house improvements and helping kids, you will have around £15k emergency cash plus £40k to invest somewhere?

You and spouse both plan to continue working part-time until SP kicks-in and will be earning around £9k each p.a. in today's money?

Have I got that right so far?

Sorry to ask so many questions. I just want to make sure I know enough before making suggestions that would be wrong for your circumstances.

Okay, got you so far...the light bulb is slowly getting brighter

Yes, you are right, so far :beer:

Trinity_Phil

mark88man wrote: »

GAR - Guaranteed annuity rate - a valueable promise that when you cash in your money you will get at least X. The value is that X is significantly above today's market rate (which is significantly below what the companies thought!)


DB = Defined Benefit = Final Salary = although you may have contributed this is valueable as you don't have the risk or hassle of working out how to generate your income it just turns up - an dis normally well protected against inflation and possibly with money (often half) for your OH if you pre decease her. Taking it early is normally allowed but often reduces how much you can have (acturial reduction).



DC = Defined Contribution = Money Purchase = Here you are responsible for building and then generating income from a pot of money. The risk is all yours. However, it can be more flexible in that currently you can access it from 55 so allows a more tapered retirement


With respect to your OH, if she is earning then even if she does not pay tax on the money it counts as taxable income. If she puts this into her pension she would receive a 20% uplift as that's the way it works. So even if you leave it in cash or cash like investments you get a guaranteed hike of 20% (which is she doesn't pay tax on it on the way out is good. Even if she does pay tax 25% is tax free (ie 5% return on your money for no risk - even if she takes it straight out again)

Okay, Mark...so what would you recommend we do with her pension to safely maximise it's potential ??