Pension/investment advice

Thrugelmir

DairyQueen wrote: »

Some years you can expect a 20% gain, on occasion the loss will be around 20% (invested in 40% equities). On average (over 10+ years) the gain should be around 5% p.a. net of charges. the whole point in doing this is to beat inflation.

Am I reading this correctly. In that you expect a 20% gain with only 40% of the portfolio invested in equities. I assume this to be with income reinvested.

The 5% is the long term average of the UK equity market (since 1900) with income invested. If one had held Japanese equities one wouldn't be so fortunate. As trade far below their market peak years later. (they weren't available to UK institutional investors and Funds until the 70's).

Deneb

Trinity_Phil wrote: »

Point 11+....Investments - as I have previously mentioned on several occasions ( I am sure you have picked up on this ), but I am a true Yorkshireman, so consequently am tighter than a ducks back-side when it comes to risking my hard-earned cash, so am very reluctant at putting it somewhere where I could potentially lose some, or even all, of it. (My mum and step-dad got their fingers burned back in the great crash of 2008 - as I'm sure lots of others did - and were losing £800 a day on their previously profitable investments and were unable to get their money back out due to the terms and conditions in the small print of their contracts...they reckon that they have lost £30k in lost income in the past 11 years !!), so as you can imagine I want to avoid this at all costs.

I was staying out of this since you had made your decision on how to take your pension, but I am even more confused now as to why you decided to take the full lump sum, rather than only what you needed, leaving the remainder in the pension where it would have been guaranteed to accrues annual CPI increases and no loss if CPI was negative?

crv1963

Some really thoughtful responses, stick with it TrinityPhil! I think what I have learnt from these is the need to i) minimise the overall tax bill in retirement ii) to worry less about who holds which funds/platforms but that the overall joint pot is held safely to benefit both partners.

With that and what I've already learnt I am going to post another thread rather than hijack this one with a couple of questions I have about our situation,

enthusiasticsaver

You have had some great responses TrinityPhil and hope we have not confused you too much. It does take time to digest.

The thing to remember is once the initial decision is made as to whether to take the maximum lump sum this is not urgent. Take some time to consider the next steps.

In your circumstances I consider the pertinent information to be that you will still be a taxpayer in retirement. If you get a part time job there will be tax to pay on that too. For that reason I think stocks and shares isas are the best route for you rather than a sipp.

Trinity_Phil

Okay...more excellent replies, thanks again people
So whilst I am digesting the above, what are your opinions on the advice our IFA has given us ?
We have another appointment with him on 7th Feb, when he will obviously be expecting us to go with his recommendations on the Pru pension and the 2 x Pru ISA's.
As stated previously, the Pru pension charges - £5400 for a net gain of £900 - look like a complete non-starter, but are the Pru ISA's a complete non-starter as well ???

Trinity_Phil

Deneb wrote: »

I was staying out of this since you had made your decision on how to take your pension, but I am even more confused now as to why you decided to take the full lump sum, rather than only what you needed, leaving the remainder in the pension where it would have been guaranteed to accrues annual CPI increases and no loss if CPI was negative?

Because I don't fully understand all of this financial stuff (you might have gathered !!) and obviously people's opinions on here have varied on this, and whilst I admit, some of you did say only take out what you need, others said there wouldn't be too much difference in the short term, so I guess I just couldn't resist the temptation of having £133k appearing in my bank account and having spent the last 30 years working earlies, lates, nights, bank holidays, kids birthdays, Christmases, Easters etc etc,, dealing with some of the most un-desirable people you would never wish to meet, then me and the wife decided that we should finally have the opportunity to spend some of it, so have just booked a Scandinavian Cruise.
Call it selfish, or stupid, or both, but we've made the decision and will just have to live with it, I guess.
(Please do not interpret this as having a pop at you - Deneb - that couldn't be further from the truth, as I fully appreciate you taking the time to contribute, along with everyone else and try to steer me in the right direction....so apologies if it comes across that way )

Thrugelmir

Trinity_Phil wrote: »

Okay...more excellent replies, thanks again people
So whilst I am digesting the above, what are your opinions on the advice our IFA has given us ?
We have another appointment with him on 7th Feb, when he will obviously be expecting us to go with his recommendations on the Pru pension and the 2 x Pru ISA's.
As stated previously, the Pru pension charges - £5400 for a net gain of £900 - look like a complete non-starter, but are the Pru ISA's a complete non-starter as well ???

There's no rush to make a decision. Take your time. Talk through your concerns with the IFA. If in doubt do nothing. Leave the money on deposit.

enthusiasticsaver

Trinity_Phil wrote: »

Okay...more excellent replies, thanks again people
So whilst I am digesting the above, what are your opinions on the advice our IFA has given us ?
We have another appointment with him on 7th Feb, when he will obviously be expecting us to go with his recommendations on the Pru pension and the 2 x Pru ISA's.
As stated previously, the Pru pension charges - £5400 for a net gain of £900 - look like a complete non-starter, but are the Pru ISA's a complete non-starter as well ???[/QUOTE

To be honest I would not use an IFA for a stocks and shares isa especially if you have already decided to go for a low charging fund like Vanguard Life strategy or something similar. It is honestly so easy to diy where the charges would be minimal. I will have a read of your post where you put what the IFA has said but charges of £5400 sound ridiculous for a relatively small amount.

The Scandinavian cruise sounds lovely. We did a Baltic one a few years back and the Norwegian Fjords one last September.

enthusiasticsaver

Trinity_Phil wrote: »

Hi folks...it's been a couple of months since my last post but things have been progressing behind the scenes.
Our IFA has been to see us a couple of times and has now sent his report through with his recommendations :-
Firstly, regarding the wife's £21,900 current pension with the Royal London, he is recommending switching this to a Prudential Retirement Account, but on the face of it (to a complete novice admittedly), it doesn't look a very good option to us once their respective charges have been deducted.
They are using a growth rate of 2.44% ( gross) in their projections which means in 11 years time when the policy matures, it would be worth £28,200, however after deducting all relevant charges (£5,400) the policy is only worth £22,800...a net gain of only £900 in 11 years !!!
Surely there are better options than that ??Yes 2.44 is not a particularly good return. Did they give you any historical growth figures to show you how the fund had performed over the last 5 to 10 years?
Regarding the remainder of my lump sum, he is recommending that both me and the wife each take out a £20k "Life Insurance Policy within the Prudential" stocks and shares ISA. The supplied literature states that this is currently returning 5.5% gross ??
He is offering to fore-go their initial Establishment Fee of £500 per ISA and only going to charge us their 1% implementation fee of £400 + an annual service fee of £254.
What are peoples thoughts, please ??

Personally I would not pay that for setting up 2 ISAs. Whilst 5.5% growth is not that bad (on drawdown rates people often suggest 4% is a good aim on a medium risk portfolio) you undoubtedly would not have to pay £254 each year for managing a £20k isa. Is that per ISA or for both? The IFA we saw wanted to steer us into Prudential so I am not sure if there is a reason they recommend them particularly. I tried to find out what funds they were actually investing in but the site only seems to be available to FAs. It looks like it is a managed fund anyway and I prefer the low cost passive ones. As a comparison my husband and I pay Halifax sharedealing £12.50 each annually for holding our stocks and shares isas. Each deal is £12.50 but as we just invested and left it three years ago it is just the annual charge.

shinytop

The IFA we saw wanted to steer us into Prudential

When I saw an IFA abount investing about a yeat ago he too was very keen on pushing me to Prudential. Is there a pattern emergine here?