Transfer valuation from DB Pension - advice

Mick70

jamesd wrote: »

Risk scales vvary but personally for investing I'd say that minimum risk means cash in FSCS backed deposit or savings accounts with no more than the FSCS limit in each banking group. I doubt that there are enough groups in the UK to do this for you and if it was done, no, 3% after costs (and inflation, as normally expressed for investment returns) is too high, 0% to -1% would be more like it.

But... that's the wrong answer to give you, because it's mainly about how much investment values can go down in a bad market.

Morning James... by growth i was kind of ignoring inflation, on my spreadsheet i had my pot growing annually at 2-3% per year and therefore was wondering if that was realistic on a low risk profile (im assuming when you ask low risk they invest your pot more into equities/govt bonds/safer shares ?) . If my pot reached £2m by time I am 58 and ready to retire , 3% of this would be £60k pa and could live on that without eating into the amount of the actual pot ?

your final point about how much values can go down if markets crash i guess is always the worry if do the transfer, potentially could wipe funds out if was a severe crash

JoeCrystal

Mick70 wrote: »

Morning James... by growth i was kind of ignoring inflation, on my spreadsheet i had my pot growing annually at 2-3% per year and therefore was wondering if that was realistic on a low risk profile (im assuming when you ask low risk they invest your pot more into equities/govt bonds/safer shares ?) . If my pot reached £2m by time I am 58 and ready to retire , 3% of this would be £60k pa and could live on that without eating into the amount of the actual pot ?h

Bear in mind that you will be paying taxes on it. So £60,000 income would only mean £48,500 net in today's term. You are still in an excellent position, though.

Thrugelmir

Mick70 wrote: »

im assuming when you ask low risk they invest your pot more into equities/govt bonds/safer shares

Government gilts currently yield less than inflation.

What do you consider to be a safer share? No company is immune to events.

Low risk with a return now requires a degree of risk taking. Days of earning a positive return with no element of risk appear to be over for the foreseeable future.

MarkCarnage

Thrugelmir wrote: »

Government gilts currently yield less than inflation.

What do you consider to be a safer share? No company is immune to events.

Low risk with a return now requires a degree of risk taking. Days of earning a positive return with no element of risk appear to be over for the foreseeable future.

Yes, the era of financial repression and negative real returns on cash, and now bonds, just goes on.....but it will not last indefinitely. Challenge is working out when it will stop, and more importantly what direction the change will take.

Back to the OP question, If you have a long time horizon in the pension pot, why would you be worried overmuch about equity volatility? Provided your draw rate is sensible, and you have a decent cash buffer to cover a couple of years (or longer, as the arguments for holding bonds is now a lot weaker), then you should be able to ride out a fairly prolonged bear market.

Alternatively, consider more cautious multi asset funds, but I wouldn't necessarily hold my breath that they will prevent some decline in asset values in certain scenarios. Correlations between risk assets tend to move towards 1 in many stress scenarios. Even government bonds might not be a safe haven if there is a general upward shift in the yield curve. Everything goes down in that environment in capital value terms.

Also consider how robust the income generation of your portfolio is. Would the income be likely to fall significantly in a stress scenario? Essentially, how secure are dividends, bond coupons and rents?

Thrugelmir

MarkCarnage wrote: »

Yes, the era of financial repression and negative real returns on cash, and now bonds, just goes on.....but it will not last indefinitely. Challenge is working out when it will stop, and more importantly what direction the change will take.

With Central Banks still propping up the global financial system more than a decade after the GFC. There's little likelihood of a change of direction soon. Nor is it unreasonable to expect people to take an element of risk to achieve a better return. Wasn't it Keynes that referred to this very topic back in the 30's. Seems as if we are following the path of Japan since the early 90's.

Mick70

sandsy wrote: »

He shouldn't be pointing you one way or the other after just an initial chat - that's a big no-no as far as the regulator is concerned.

And those fees, good grief! £34k and £1k a month thereafter - no wonder he thinks you should transfer into something he can manage for you! That's nearly half your DB pension each year.

Well I have decided to stop using the advisor , or not go ahead with using him i should say , we received no analysis, no arguments for staying with the DB , just a 20min phone call and told daft not to take the offer ?? hardly independent advice, also told the running costs of 0.75% were not negotiable (and i read that royal london charge 0.4% themselves), i felt he was looking after his own interests rather than ours first and then his own.

Running out of time now to find a new local advisor and start process again so may wait for the 3month window to end and then pay for a new CETV valuation

On another note, purely out of interest - if royal london charge 0.4% annual fee for managing the pot , why do we also pay for an IFA annually ? just curious as would seem both parties doing the same work ?

Aegis

Mick70 wrote: »

Well I have decided to stop using the advisor , or not go ahead with using him i should say , we received no analysis, no arguments for staying with the DB , just a 20min phone call and told daft not to take the offer ?? hardly independent advice, also told the running costs of 0.75% were not negotiable (and i read that royal london charge 0.4% themselves), i felt he was looking after his own interests rather than ours first and then his own.

Running out of time now to find a new local advisor and start process again so may wait for the 3month window to end and then pay for a new CETV valuation

On another note, purely out of interest - if royal london charge 0.4% annual fee for managing the pot , why do we also pay for an IFA annually ? just curious as would seem both parties doing the same work ?

Royal London would pay for your pension wrapper and perhaps some or all of the underlying investment costs depending on the fund selection. The IFA's job is to advise you on which funds to hold as part of your overall strategy, but perhaps more importantly to keep you informed on risk and tax implications of your retirement income. Sometimes it can seem like there's overlap between the pension and the adviser, but usually that's not the case.


Incidentally, at £34k I'd have hoped they would offer you pretty much any investment stratgy you wanted! That's a fee that should warrant an entirely bespoke proposition.

Mick70

Aegis wrote: »

Royal London would pay for your pension wrapper and perhaps some or all of the underlying investment costs depending on the fund selection. The IFA's job is to advise you on which funds to hold as part of your overall strategy, but perhaps more importantly to keep you informed on risk and tax implications of your retirement income. Sometimes it can seem like there's overlap between the pension and the adviser, but usually that's not the case.
.

yes it was coming across to me as if an overlap , paying royal london a % to do the investments nd then paying an IFA a % on top of that

ManMadeWays

I paid 0.6% one off on £1.5m and 0.6% ongoing, this commenced end of 2016 and I know the risk on the IFA is seen as higher now. I also set up pensions/ISA for my wife and she had the benefit of the "lower" 0.6% also. When I retire I will take even more interest in the fund selection and do it myself and maybe pay on an hourly rate for advice on minimising tax on withdrawals. I have already had advice on this thread that I have not had from my IFA ! :T

Mick70

ManMadeWays wrote: »

I paid 0.6% one off on £1.5m and 0.6% ongoing, this commenced end of 2016 and I know the risk on the IFA is seen as higher now.

Do you also pay a% to the pension provider i.e Royal London, Standard Life ... as well as the % to the IFA