Financial health check/checkpoint

richd70

Hi

Hope it's ok to ask this sort of question here, I'm happy to do some research, but also good to get some other opinions about where I'm at and of I'm doing anything obviously wrong or missing something fundamental?

Personal situation

I'm 50 years old

I have a 48yr old wife, ex-teacher who is now stay at home "home maker" (hate that term).

I have 2 children - 13 and 10 - both attending private schools.

I have been working for the same company now for 20yrs. Relatively safe, but, as we've all learned recently, nothing is safe anymore!

Pension

Have a company DC pension into which I pay 12% of my salary and my company pays 12% (the max). It is currently valued at £298k.

I have two other personal pensions floating around, one valued at £98k and one at £30k

Mortgage

I have a mortgage of £310k, which represents about 25% LTV. I pay £1700pm on a fixed 5yr 2.14% repayment mortgage (fixed rate expires June 2021), Tesco now Halifax. 19yrs left on mortgage.

Investments

I have a JISA for my 13yr old at Charles Stanley direct which has £13k in Vanguard Inv UK LT Lifestrategy (£60pm going in) and £2k HSBC Global AM UK American

I have a JISA for my 10yr old at Charles Stanley direct which has £9k in the same Vanguard Inv UK LT Lifestrategy (£60pm going in)  and £2k HSBC Global AM UK American

I also have an ISA with £11k at Charles Stanley direct which has £9k in the same Vanguard Inv UK LT Lifestrategy; £10k with HL invested in Legal & General UK 100 index trust and £5k with HL invested in Legal and General International index trust. Also had £2k in LF Woodford fund (worth £400 now).

I have £28k directly invested with Legal and General in their UK index Trust (ISA)

Other

I have £40k in savings (from inheritance)

Have some individual stocks that I bought about 10 or 12 years ago with the share centre (tesco

 £1800 and marks and Spencer £800, both bought at the time as a "buy what you know" strategy, and they were both places that seemed to be busy at the time).

No credit card debt. No other outstanding loans.

I'd like to make sure my money is working as hard as it can be. I'm not sure the funds I've picked are as good as they could/should be and I'm worried that with the coronavirus destroying economies my investments could be depleted. 

My investments are for the long term (10yrs+). I guess I'd like to have a lump sum to contribute/pay for a wedding in 15-20 years time for my daughter. And I guess I'd like to not have to worry too much about money when I retire (in 15yrs). Most of the above investments have been invested for 5-10 years already, but haven't really set the world alight, it's fair to say. For example my 13 year old's JISA (currently valued at £15k was originally an £11.5k investment, and has had £60pm going in for 2 years). The L&G £28k investment was originally £15k about 12years ago.

Should I look to move my funds into global markets, as a priority? Anything else jump out as being finish? And what about investing American tech, the Google, Amazon, Facebook, Apples, have I missed the boat there?

As I said at the beginning, hope it's ok to do a financial health check like this. Ignore me, or politely tell me to go away if not.

Thanks

El_Torro

Hard to say if you're doing well, since we don't know what your outgoings are like. I mean, you certainly have a lot more assets than many people in the UK, but is it enough to meet your objectives? (Expenditure, when you plan to retire, etc...). 

As for your ISA investments: Yes, I think you're way too heavily invested in the UK. An optimist might tell you to wait until UK shares recover after the great Brexit deal we're going to get imminently. Personally I would prioritise globalizing your investments more now, especially since you're in it for the long term.

Regarding investing in large American tech companies, the returns have certainly looked quite attractive over the last few years. Whether this trend will continue is anyone's guess. Personally I would focus on investing in global index trackers (or global multi asset funds). Big American tech companies are well represented in these funds anyway, I don't think there's a need to over expose to these companies.

You have £40k in cash. Is this too much? I'm not saying it is, this may be appropriate for a family of 4 with 2 kids in private school. Especially if you're not too keen on sending the kids to state school if you unexpectedly get laid off. Point is you should have an adequate emergency fund. Whether it's £40k, or more, or less, only you can say.

Out of interest, you say you want to pay for your daughter's wedding. Are you not interested in contributing towards your son's wedding? Is the father of the bride paying for everything still a thing? Not really a serious question, just found it funny how you phrased it. 

csgohan4

Being heavy in American companies can be done directly or via American funds/ IT's. Personal preference. But I would put more of your core funds in global index trackers and supporting satellites focusing on parts of your portfolio you may be light on, such as small caps, EM e.t.c 

I have some money focusing on China and American to bolster my portfolio weighting, The American fund is down at the moment but the China fund is on the way up which in  a way emphasizes diversifying ones portfolio. I am staying away from UK weightings at the moment due  to the current climate 

mark13

Pension wise I think you are on target.   How are your DC pension funds doing ? 1st thing would be to make sure they are performing and jiggle them round if necessary.  Also I'd either sell the shares or move them into your ISA as you have some wiggle room there and look at moving the L&G FTSE 100 to L&G Global tech fund.  

Albermarle

Have a company DC pension into which I pay 12% of my salary and my company pays 12% (the max). It is currently valued at £298k.

I have two other personal pensions floating around, one valued at £98k and one at £30k

Whilst you give details about your other investments, there is no mention of how your much larger DC pension is invested and your two other pensions , just 'float around ' .  I think how £426K is invested is more important than how the rest ( around £75K ) is invested . 

richd70

Thanks very much for taking the time to reply, it is much appreciated.
Some really good feedback and ideas in here, which I will look into over the weekend.
To answer some of the questions:

El_Torro said:

Hard to say if you're doing well, since we don't know what your outgoings are like. I mean, you certainly have a lot more assets than many people in the UK, but is it enough to meet your objectives? (Expenditure, when you plan to retire, etc...). 

My outgoings are disappointingly high, this is an ongoing conversation my wife and I are having to try and bring this down. I've done a spreadsheet with a projection for how much money I need over the next 15 years. How depressing!

Out of interest, you say you want to pay for your daughter's wedding. Are you not interested in contributing towards your son's wedding? Is the father of the bride paying for everything still a thing? Not really a serious question, just found it funny how you phrased it. 

It's funny, I did have 'son's wedding' in there too, but deleted it as I (wrongly) thought it would draw too much criticism.

mark13 said:

Pension wise I think you are on target.   How are your DC pension funds doing ? 1st thing would be to make sure they are performing and jiggle them round if necessary.    

and

Albermarle said:

Have a company DC pension into which I pay 12% of my salary and my company pays 12% (the max). It is currently valued at £298k.

I have two other personal pensions floating around, one valued at £98k and one at £30k

Whilst you give details about your other investments, there is no mention of how your much larger DC pension is invested and your two other pensions , just 'float around ' .  I think how £426K is invested is more important than how the rest ( around £75K ) is invested . 

My DC pension used to be split between UK Equity (Passive) and Overseas Equity (Passive). In August I switched it from passive to active. Even though the fees were slightly higher, they were still quite low and I thought it would be worth it. In August the split was UK Equity (Active) (30%) £87k and Overseas Equity (Active) (70%) £203k. I just checked and it's now at £88k and £210k. The Global Equity (Active) fund is split into MFS Meridian Global Equity fund 38.3%, Baillie Gifford Long Term Global Growth fund 24.5% and KBI All World Equity Strategy 37.3%.
As for the other pensions 'floating around' the £98k pension is invested in the Zurich Managed AP which is 28% UK equities, 14% US equities, 14% EU equities, 10% property, 10% Asia Pac equities, etc. quite diversified actually, although majority does seem to be UK equities. And the £28k is in Scot Eq Global Pn (ARC) £13.5k and Scot Eq Mixed Pn (ARC) £12.5k.

Also I'd either sell the shares or move them into your ISA as you have some wiggle room there and look at moving the L&G FTSE 100 to L&G Global tech fund.  

Good idea on both of these!

El_Torro said:

Regarding investing in large American tech companies, the returns have certainly looked quite attractive over the last few years. Whether this trend will continue is anyone's guess. Personally I would focus on investing in global index trackers (or global multi asset funds). Big American tech companies are well represented in these funds anyway, I don't think there's a need to over expose to these companies.

Good suggestion on this, thank you

kangoora

No mention of DC pension pot for your wife. If she isn't earning you can still put in £2880 (grossed up to £3600) per year into a pension.

ian1246

Looks good.

One area I noticed you were missing in your post - what is your wife's pension arrangements? If you die, your wife gets the DC pots etc...

The issue, however, is if you don't die but require specialist care later in life - such as for dementia or physical disability etc... In such circumstances your pensions will be used to fund *your* care.. whilst your wife will be left living on whatever her own pension arrangements are. 

Needless to say... this could pose a risk to your wife's future quality of life/retirement. Hopefully such circumstances will never occur, but it's sadly not unheard of in later life.

So basically Wife needs her own robustly funded pensions.

Albermarle

Your DC pensions are quite aggressively invested , but that is fine if it suits you . They are a bit UK centric but not dramatically though .
I know from my own experience is that when having multiple pensions and investment accounts , there can be a lot of overlap and you need to have a more helicopter view of them and cash savings so you have a better overall picture , rather than dealing with each of them as a separate entity . Not really an urgent issue but something for the future maybe .

Another_Saver

richd70 said:

Hi

Hope it's ok to ask this sort of question here, I'm happy to do some research, but also good to get some other opinions about where I'm at and of I'm doing anything obviously wrong or missing something fundamental?

Personal situation

I'm 50 years old

I have a 48yr old wife, ex-teacher who is now stay at home "home maker" (hate that term).

I have 2 children - 13 and 10 - both attending private schools.

I have been working for the same company now for 20yrs. Relatively safe, but, as we've all learned recently, nothing is safe anymore!

Pension

Have a company DC pension into which I pay 12% of my salary and my company pays 12% (the max). It is currently valued at £298k.

I have two other personal pensions floating around, one valued at £98k and one at £30k

Mortgage

I have a mortgage of £310k, which represents about 25% LTV. I pay £1700pm on a fixed 5yr 2.14% repayment mortgage (fixed rate expires June 2021), Tesco now Halifax. 19yrs left on mortgage.

Investments

I have a JISA for my 13yr old at Charles Stanley direct which has £13k in Vanguard Inv UK LT Lifestrategy (£60pm going in) and £2k HSBC Global AM UK American

I have a JISA for my 10yr old at Charles Stanley direct which has £9k in the same Vanguard Inv UK LT Lifestrategy (£60pm going in)  and £2k HSBC Global AM UK American

I also have an ISA with £11k at Charles Stanley direct which has £9k in the same Vanguard Inv UK LT Lifestrategy; £10k with HL invested in Legal & General UK 100 index trust and £5k with HL invested in Legal and General International index trust. Also had £2k in LF Woodford fund (worth £400 now).

I have £28k directly invested with Legal and General in their UK index Trust (ISA)

Other

I have £40k in savings (from inheritance)

Have some individual stocks that I bought about 10 or 12 years ago with the share centre (tesco

 £1800 and marks and Spencer £800, both bought at the time as a "buy what you know" strategy, and they were both places that seemed to be busy at the time).

No credit card debt. No other outstanding loans.

I'd like to make sure my money is working as hard as it can be. I'm not sure the funds I've picked are as good as they could/should be and I'm worried that with the coronavirus destroying economies my investments could be depleted. 

My investments are for the long term (10yrs+). I guess I'd like to have a lump sum to contribute/pay for a wedding in 15-20 years time for my daughter. And I guess I'd like to not have to worry too much about money when I retire (in 15yrs). Most of the above investments have been invested for 5-10 years already, but haven't really set the world alight, it's fair to say. For example my 13 year old's JISA (currently valued at £15k was originally an £11.5k investment, and has had £60pm going in for 2 years). The L&G £28k investment was originally £15k about 12years ago.

Should I look to move my funds into global markets, as a priority? Anything else jump out as being finish? And what about investing American tech, the Google, Amazon, Facebook, Apples, have I missed the boat there?

As I said at the beginning, hope it's ok to do a financial health check like this. Ignore me, or politely tell me to go away if not.

Thanks

The information is a bit limited (your income, wife's pensions etc.) but here goes:

~£1.2m house with £310k left on a 2.14% 5y fix 19 year amortisation - 2.14% seems high?

£430k DC pens - decent but why active? It's a personal choice but using active fund managers is such a rip off when many platforms would let you replicate the fund's portfolio yourself manually, or you can just stick with index funds for simplicity. It's not just the higher fees, the maths, the statistics - all active funds change manager normally at least once a decade. Unless you have some reason to go for these funds over others, in which case go for it. But make your life easier and get them all on one platform.

13yo has £15k JISA all equity - fine, ditto re: platforms

10yo has £11k JISA all equity - fine, ditto re: platforms

I think your ISAs add up to £54k, all UK/global equity index funds - fine, personally I'm more bullish on the UK than a lot of others in the forum for reasons too academic for this thread so in my opinion your UK weighting is fine. Ditto re: platforms

£40k savings - having that much cash is probably a sensible reserve given the disappointingly high outgoings.

You'll find little sympathy given your salary alone is enough to support a £1.2m house and put 2 kids through private education. I don't know what your income is being spent on but your savings seem small given how high your income must be. Where is all the money going? Break it down and cut out the unnecessary luxuries (even if they seem like necessities). I doubt your pension will sustain that lifestyle and you still have the mortgage to pay off too.

Ray_Singh-Blue

Property and physical assets, £1.2 million
Equities, £500k
Cash £40k
Bonds £0K
----
Gross assets £ 1.74 million
Borrowing £300k
Net assets £1.44 million
Leverage 20%
----
Ignore the kids ISAs, that money isn't yours any more.
----
Put that way you are in a strong position. In retirement you may choose to sell your house and downsize?