choosing a new IFA

balbs

.. I just want to pay a flat fee for a couple of hours of discussion to talk through drawdown and tax implications -

As BritishInvestor asks why do you need to discuss drawdown and tax with an IFA?  Loads of information if you look around and from the sound of it you are intelligent enough to think it through yourself unless your financial affairs are complicated.  It strikes me very much like power of attorney or wills - once upon a time solicitors could mystify it and justifiy charging hundreds of pounds to set one up, now it can be done online for straightforward ones for under £100.  Knowledge is everything.

Up 25%? And your other half is down over the same period. Sounds odd- well it sounds odd but true, and she has reams and reams of nicely printed figures to prove it. (I agree a bit with the comment about index funds btw but it all depends on your attitude to risk).  

83705628

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Up 25%? And your other half is down over the same period. Sounds odd- well it sounds odd but true, and she has reams and reams of nicely printed figures to prove it. (I agree a bit with the comment about index funds btw but it all depends on your attitude to risk).  

/
Fair enough, I don't trust a single fund manager with my money but I do believe that British and global businesses will deliver very satisfactory returns over the long term so I prefer the safety owning the lot to the risk of a few fund managers opinions.

dunstonh

IvanOpinion said:

PS: And I know you will find this hilarious, one of the IFAs I contacted seemed to want to charge me a 5% transfer charge and a mere 2.5% per year for management fees.  After thinking hard about it for at least 1 nanosecond I turned down his offer.

Whilst cost will vary significantly across IFAs, I very much doubt an IFA would be charging 2.5 p.a.   The dominant charge is 0.50% p.a. with smaller values rising to 1%.

Albermarle

 I am currently trying to find an IFA to discuss retirement options but every single one so far has wanted to take control of my SIPP and keeps talking about percentages ... no matter how many times I tell them I will manage it myself .... I just want to pay a flat fee for a couple of hours of discussion to talk through drawdown and tax implications - sadly no takers, so I guess it is back to doing my own research (I am also thinking of upgrading to kit kats).

If you are still with Fidelity, their retirement advisors will talk you through drawdown, tax etc for free. In fact before you can start drawdown you need to talk to them anyway ( legal requirement I think as they have to warn you that if you take the money too quick it will run out ) . They will not offer personal advice, although Fidelity will also do this but it is quite expensive ( more geared up to large clients or situations like DB transfers ) and they only offer Fidelity funds. 

IvanOpinion

BritishInvestor said:

Yep, your experience is all too common
Out of interest what is it that you feel you need a hand with re drawdown and tax implications? 

At the minute I am not sure I am even describing it right.  I have been trying to read up on various sites to get an understanding, but the crux is I have both ISA funds and a couple of DC pensions (sadly I missed out on the DB by a few months).  The approximate split before doing anything is approx pension 60%, ISAs 40% (I am ignoring some other shares and cash savings)

I am looking to minimise tax liability so I am wondering if it is better to
1. take the 25% out of the pension and then drawdown on the pension at an amount that matches the (expected) tax free allowance (£12,500 at todays rate) and make up the difference from the ISAs (I think there may also be some CGT/tax implications here since it would take me a few years to get the 25% back into ISAs).
OR
2. drawdown the pension at the tax free allowance plus 25% (approx £16,666 at todays rate) and again make the difference up from the ISA.

I have been trying to model it in Excel and it looks like the second of these may work out a bit better.  So still investigating at the minute 

bowlhead99

IvanOpinion said:

I am looking to minimise tax liability so I am wondering if it is better to
1. take the 25% out of the pension and then drawdown on the pension at an amount that matches the (expected) tax free allowance (£12,500 at todays rate) and make up the difference from the ISAs (I think there may also be some CGT/tax implications here since it would take me a few years to get the 25% back into ISAs).
OR
2. drawdown the pension at the tax free allowance plus 25% (approx £16,666 at todays rate) and again make the difference up from the ISA.

I have been trying to model it in Excel and it looks like the second of these may work out a bit better.  So still investigating at the minute 

It wouldn't make much sense to draw out £12500 of income, find it wasn't as much as you want to spend, and then 'make the difference up from the ISA' (i.e. taking money out of the fully tax-exempt ISA) if you already have more money on hand (from the 25% lump) than you can fit into ISAs.  Surely you would make up the difference (your spending shortfall) from the element of the 25% that is sitting around idle and can't fit into the protection of your ISA wrappers.

A reason to take all the 25% and use that for your spending would be to allow you to keep making large pension contributions if you're still earning. But if you don't have any earned income any more so are not bothered about the MPAA kicking in and restricting further pension contributions when you take your first pound of income, no harm in starting to take income.

If the 25% of the whole pot doesn't need to be spent right now and can't fit back into a tax wrapper, don't take it all out of the pension unneccessarily. Just let it grow inside the pension and take it later when it's larger.  If relevant, money in a pension is outside your estate for inheritance tax whereas non-pension cash or investments aren't. 

Would seem to make sense to max out your £12500 personal allowance each year using UFPLS to take £16667 of total cash rather than also taking a whole load of extra TFLS that you can't use for anything at the moment. If you need more from the pension (to meet expenses and use ISA & pension allowances) without wanting a tax bill, you could put a further proportion of your pension into drawdown (taking the 25% element only and leaving the rest crystallised).

While it seems attractive to only take small amounts out the pension to keep it within your personal allowance and pay zero income tax, you may be storing up a problem for yourself if you'll ultimately want to grab a large chunk of the pension at some point (e.g. to make a big gift to someone or extravagant purchase etc) and might one day find yourself in a position that you were taking £50k in a year and slipping into higher rate tax - in which case it might be ok to take a bit more than £12.5k income now and pay some basic rate tax as you go along if that helps you avoid a higher rate bill later.   You might also fear that basic rate tax might increase from 20% to something higher in future years (obviously an unknown that can not really be planned for) so if you are expecting to pay tax on all the pension at some point anyway (rather than let it be inherited by someone when you pop your clogs) it would not be the end of the world to take more than £12500 income now and move it out of your pension for day to day spending.

Lots of things to think about depending on personal circumstances.

Albermarle

IvanOpinion said:

BritishInvestor said:

Yep, your experience is all too common
Out of interest what is it that you feel you need a hand with re drawdown and tax implications? 

At the minute I am not sure I am even describing it right.  I have been trying to read up on various sites to get an understanding, but the crux is I have both ISA funds and a couple of DC pensions (sadly I missed out on the DB by a few months).  The approximate split before doing anything is approx pension 60%, ISAs 40% (I am ignoring some other shares and cash savings)

I am looking to minimise tax liability so I am wondering if it is better to
1. take the 25% out of the pension and then drawdown on the pension at an amount that matches the (expected) tax free allowance (£12,500 at todays rate) and make up the difference from the ISAs (I think there may also be some CGT/tax implications here since it would take me a few years to get the 25% back into ISAs).
OR
2. drawdown the pension at the tax free allowance plus 25% (approx £16,666 at todays rate) and again make the difference up from the ISA.

I have been trying to model it in Excel and it looks like the second of these may work out a bit better.  So still investigating at the minute 

The advice on this forum is usually 'do not let the tax tail wag the investment dog' 
In other words you should consider how your money is best invested ( leave part of the 25% tax free cash in the pension for example ?) as a priority, and not worry too much if you have to pay a bit of tax . In any case Rishi needs all the help he can get ! 

IvanOpinion

Bowlhead, Albermarie, thanks, that gives me additional food for thought.  I am not quite at the point were I need to make a decision (probably 2-3 years) so I have just started my journey of exploration into the options. 

IvanOpinion

dunstonh said:

IvanOpinion said:

PS: And I know you will find this hilarious, one of the IFAs I contacted seemed to want to charge me a 5% transfer charge and a mere 2.5% per year for management fees.  After thinking hard about it for at least 1 nanosecond I turned down his offer.

Whilst cost will vary significantly across IFAs, I very much doubt an IFA would be charging 2.5 p.a.   The dominant charge is 0.50% p.a. with smaller values rising to 1%.

Let's just say I could tell by the look on his face that laughing when he told me the percentages was not the correct response - I honestly thought he was making a joke.  To be fair, I think the 2.5% included all the fees, his, the platform, fund and transaction costs and was obviously at the upper end of sanity but a 5% transfer fee was bordering on extortion.  Considering I am currently averaging out at about 1% for all of those (and II paid me £500 to move part of my portfolio to them) - I would have to double check it but I think that even with my old advisor it was about 1.7%.

Apologies to r6owned I did not mean to hijack your thread.

Malthusian

2.5%pa "all-in" is indeed the upper end of sanity, and charging a 5% initial fee on top means they are going for clients with absolute zero cost-consciousness. 2.5% suggests it was a salesman (tied adviser) from St James's Place or similar, not an IFA.

There may well be expensive IFAs who charge 1% and 5% initial, but the crucial point is that they would have no incentive to recommend expensive funds adding another 1.5%pa to the all-in cost on top. Actually the complete opposite - they would be more likely to recommend low-cost tracker funds to make the overall charge more reasonable. SJP and other vertically-integrated churn factories are happy to recommend funds which add another 1.5% on top, because they take a large slice of that as well.