Advice on my plans please

Alexland

kerrjp wrote: »

The Nutmeg return was only what it currently shows but has only been in there 2.5 years, I as thinking a return on average of 6-8% on those accounts would be feasible over the long term, I am looking at a 10 - 15 year investment possibly longer.

Yes that historic result is mostly down to the surging stock markets and pound devaluation so unlikely to continue. A more realistic medium term return expectation, even for a 100% equities high risk portfolio, is around 2-3% above inflation and fees.

Numeg's 0.45% fixed allocation platform fee is expensive compared to Vanguard Investor at 0.15%. An investment in the Vanguard LifeStrategy fund series would deliver roughly the same result as the Nutmeg ETF mixes with roughly the same investment costs.

kerrjp wrote: »

I presume the S&S Lifetime ISA would have to be personal contribution? I am unsure if i am better of in a pension through the ltd company due to the tax savings or to do personal contributions due to govt top up or to as you say do the lifetime ISA for the 25% bonus? or maybe spread across each?

Yes so it is less advantageous than the company pension contribution however it might be better for you than the S&S ISA contributions. You get a 25% bonus on contributions but there is a 25% penalty (on the uplifted balance so slightly higher) for early access before 60.

Alex

kerrjp

Hi Alexland,

Thank you for your reply, I was looking to open a pension with nutmeg as well as our existing stocks and shares ISA, to be honest I have liked the ease of their platform but have to admit I was expecting a long term return to be higher than the figures you expect. Does opening a nutmeg pension sound like a bad move then? in terms of Stocks and shares ISA any recommendations on best way to invest in the vanguard funds, or is there something else just as simple? For me I do not have the time and enough investment knowledge to manage and re balance a portfolio at that level hence the attractiveness of Nutmeg?

Anyone else please feel free to guide me :-)

Alexland

Nutmeg are a loss making company with relatively high fees. They don't offer their fixed allocation 0.45% platform fee on their pension product so you have to pay the managed 0.75% platform fee. Then the investment ETF fees are extra.

By comparison the Aviva stakeholder pension is 0.55% (reducing as the pot gets bigger) including the investment fund management fee. It's usually only available via IFAs but you can get it via Cavendish for a small setup fee. Aviva's product has a good default strategy and is as simple to use as Nutmeg (once you have navigated the paper application form) using the same MyAviva login as their car/home insurance. No rebalancing is required you can just add money.

http://www.aviva.co.uk/stakeholder-pension/

https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/aviva/

In terms of future return expectations you may find the below helpful

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/why-investors-prepare-for-lower-returns

Alex

kerrjp

Hi Alexland,

Many thanks for the info, I will certainly look into the Aviva pension, I am relaly unsure how to proceed now with the Nutmeg S/S ISAs any opinions on similar investment options as an alternative to Nutmeg where i can simply drip feed money and not have to play with funds over the 10 - 15 year period, if Vanguard is the way to go, whats the best way to get involved in them?

Thanks for all your help and anyone else that can give some advice as although I understand risk vs reward in general on investing I just want something steady making my money grow for my families future and the longer term so I do not have to work into the later years of my life :-)

Thanks

cloud_dog

I know you've moved in to a 'platform' discussion but my one comment would be that I think you need to re-assess and re-prioritise the amount you are putting in to pensions.

£500 pension
£1000 ISA
£800-£1000 Overpay mortgage

I would suggest you re-adjust these allocations. And, ensure you maximise your OH pension contributions.

AnotherJoe

cloud_dog wrote: »

I know you've moved in to a 'platform' discussion but my one comment would be that I think you need to re-assess and re-prioritise the amount you are putting in to pensions.

£500 pension
£1000 ISA
£800-£1000 Overpay mortgage

I would suggest you re-adjust these allocations. And, ensure you maximise your OH pension contributions.

I agree. I can understand with a very large mortgage and possibly uncertain job the need to minimise the mortgage, but i would suggest OP at least looks at flipping the pension/ISA amounts the other way round.

kerrjp

Hi AnotherJoe / cloud_dog,

Thank You for your input, I value the insight, my attitude towards pensions has always been negative which i think was a learnt behavior as both my parents were against pensions and advocated instead of reducing mortgage debt so that in essence the equity in the home becomes your pension later. I realise now that although that did work for them and in their years however it is a risky strategy to be completely at the mercy of the housing market later in life.

However I still have always had a hesitant view towards pensions due to the money being inaccessible until much later. Where as with the S/S ISA i could if necessary or market conditions were favorable after say a 10 -15 year period access some or all of the funds. Can someone explain to me the actual reason as to why a pension should perform better than standard S/S investment through ISA without the lock in? I understand obviously the government incentive and the corp tax reduction for company contributions but that aside is there any reason a pension trumps the ISA?

Sorry if this is a stupid question but I am pretty sure I must be missing something.

Thanks

cloud_dog

You are mixing the wrapper with the investment options. You can hold the same investment in a SIPP as you can a ISA (ignoring personal pensions for the moment) so, performance is all about the investment not the wrapper.

If you are happy to hold investment X in your ISA, why not be happy to hold it in your SIPP?

Regarding access. This is where you need to be clear on what 'need' you are trying to address, and also what are your plans. If you intend to retire at 50 and have no other source of income, i.e. ISAs, then putting money in to a pension (accessible currently at 55) is not appropriate. If you are thinking of retiring at or after 55, then there isn't a problem.

You need to figure out what you are likely to need finance wise that cannot wait until aged 55.

Giving up the tax benefits in your position is a "Big mistake, big, huge".

If we agree you can ignore performance considerations (an investment will perform exactly the same in a SIPP as it will an ISA), you therefore need to seriously consider the benefits of and limitations of prioritising your pension.

As AnotherJoe suggested, simply switching the ISA / SIPP amounts would be a start.

In my financial head, saving or investing is not about "What do I have left to save/invest" it is about what do I need to address and what do I need to do to achieve this. This sometimes means reducing costs elsewhere.

kerrjp

Thanks cloud_dog,

I get what you are saying, I accept the view on missing out on the pension contributions and associated savings now would be a big, error I will re-balance my target figures to increase pension and reduce ISA, I can always pay more into the ISA or pension on an ad-hoc basis if and when I have extra funds.

I am thinking now about my S/S ISA with nutmeg and thinking as currently my wife and I hold an account each with nutmeg, that it might be prudent to move one of these to somewhere like the mentioned Vanguard lifestyle funds, kind of hedging my bets a bit or a bit of different diversification. With regard to the pension I will be researching the options but the Aviva stakeholder looks a strong choice and can be started relatively easily.

Any thoughts on the above guys?

Alexland

kerrjp wrote: »

if Vanguard is the way to go, whats the best way to get involved in them?

Vanguard offer ISAs via their own platform at 0.15% platform fee (much cheaper than Nutmeg):
https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

You can then invest in LifeStrategy funds which are similar in cost and holdings as the Nutmeg fixed allocation portfolios with VLS20 being low risk (Nutmeg 1/5) and VLS100 being high risk (Nutmeg 5/5). The cost is 0.22% which is about the same as Nutmeg's quoted 0.21% investment cost.
https://www.vanguardinvestor.co.uk/what-we-offer/life-strategy-products

Vanguard do not offer pensions in the UK yet - pensions tend to cost more than ISAs with most providers.

Alex