When to get an Independent Financial Advisor?

jimjames

After a pensions seminar recently it's made me even more aware of the value of S&S ISAs for having a tax free income in retirement. I suppose that assumes that they remain tax free for the next 30 years or so but it is useful to have income that doesn't go towards your personal allowance if you have decent pension provision and are already making good annual payments into pensions.

BananaRepublic

jimjames said:

After a pensions seminar recently it's made me even more aware of the value of S&S ISAs for having a tax free income in retirement. I suppose that assumes that they remain tax free for the next 30 years or so but it is useful to have income that doesn't go towards your personal allowance if you have decent pension provision and are already making good annual payments into pensions.

Sunak is going to have to raise money to pay off our debt, and I have heard many suggestions including a so called wealth tax. I don’t see how they could target existing tax efficient wrappers used by many including retirees, but we shall see. Increasing CGT to match earned income tax is another suggestion. 

Scotbot

dunstonh said:

 I spoke to someone in 2018, he told me he did not charge a fee and earned his living from the products he sold. He was to email his recommendations but never did and I did not follow him up. Now I am considering talking to people again I will look more closely at their credentials 

Was that person an IFA or an FA?     There is an anomaly with FAs that retail own-brand investments that allow them to still show a bundled charge and they are paid out of those charges.   So, it may look like you are paying fund charges and not an adviser charge but in reality you are. It is just built into the fund charges.   
Unregulated sales people selling unregulated investments can earn a commission.   However, you shouldn't go near those.

I don't  remember but I thought he wss an IFA. He worked for his own company not a big brand.  He was a personal recommendation but the guy turned up 45 minutes late without bothering to call and let me know then failed to follow up.  So no way he was getting his hands on my money.
Any tips for picking an IFA is there a sticky on this?

eskbanker

Scotbot said:

Any tips for picking an IFA is there a sticky on this?

https://www.moneysavingexpert.com/savings/best-financial-advisers/

darkidoe

jimjames said:

After a pensions seminar recently it's made me even more aware of the value of S&S ISAs for having a tax free income in retirement. I suppose that assumes that they remain tax free for the next 30 years or so but it is useful to have income that doesn't go towards your personal allowance if you have decent pension provision and are already making good annual payments into pensions.

In my opinion, S&S ISA is somewhat of a legal tax haven. Might not be astronomical amounts you can accumulate in there but it can become substantial enough to allow one to retire quite comfortably with zero tax for as long as rules remain! It also perpetuates the problem of wealth inequality; people who benefit from the tax advantage are people who are able to and prepared to save at a level that can maximise it. 

Maximise it while you can. 

darkidoe

RosieAnn said:

@darkidoe
Hi darkidoe, thank you for your advise. I have never considered opening a SIPP and to be honest, was not really aware of the differences of LISA versus SIPP. Thank you for the link to the moevator article, very helpful.

It is quite difficult to forecast my long term future goals eg where I will be in 30 years time. I think for now I am going to keep investing in my S&S ISA for more medium- long term goals. With my current earning and likely next few years, I will not go over £20,000 tax allowance- so I will just try to max out this allowance with my S&S ISA and LISA. I saw the LISA as a potential early pension fund - as doubt I want to work till I am 68 [current age I can access my NHS pension]. I also am aware  if I open a SIPP - I may get into problems later on in my career when I am earning more and potentially exceeding my life time allowance. I was under the impression LISA is not included in your life time allowance? 

Currently you can access SIPP from age 55, which will rise to 57 in 2028 (basically State Pension age minus 10 years). LISA access rules is at 60 years old at present. 

You are quite right. LISA is not counted in the Lifetime allowance. There is that potential of arriving at the Lifetime allowance before pension age. I would rather think that is a good problem to have. When you appear to start to approach this stage, I think an IFA would be warranted. Most GPs who were on the old pensions schemes with better terms in the recent years have had that issue, and hence there was an exodus of GPs who took early retirement who didn’t see a point working longer to pay a hefty tax bill when the lifetime allowance kept being lowered. The latest NHS 2015 pension is a CARE pension which has its benefits watered down quite a bit from the past schemes. I haven’t done the maths myself but it would be an idea to run some numbers to evaluate when this point might be reached based on your projected earnings.

Your strategy is not a bad one. Just have a read around the withdrawal rules and have a think about it. I still believe there can be a role for SIPPs, but S&S ISAs definitely. Note these rules change all the time, but we can only plan with the rules we have at present and hope the goalpost don’t change too much over the years.

cfw1994

RosieAnn said:

Hi @DiggerUK
Thank you for your advise. I feel I do need an emergency fund for things like if boiler breaks down, I will likely need a new car in 1-2 years time. I agree that having so much sitting in cash is not going to gain any benefits.
In regards to your advise for overpayments of the mortgage, I have considered this. However, I felt that since the interest is quite low [2.5%] - I may get better returns investing the money into S&S. There are quite a few differing views on this forum about whether to overpay your mortgage or invest your money instead. So perhaps a mixture of the two is a good balance? 

My advice to a younger me would have been to put more into S&S ISAs.  

Overpaying the mortgage is a reasonable thing, but with rates low I would only do that a bit: focus more on the longer term S&S ISA and/or additional SIPP.   

You now know your LISA cannot be accessed until 60 (as you already have a house), so not as early as a SIPP...but other ISA funds can be taken at any time......so potentially to help fund a gap between any early retirement and the pensions.

No-one has a crystal ball on future changes to pensions, etc.....the LTA is certainly something to be aware of in your profession, hence my leaning towards the S&S ISA, although clearly your investments there were taxed before you invest them...

in terms of when to get an IFA....as a friendly resident one out it earlier, you aren’t really yet in IFA territory.....& as someone else put it: when you know how to identify a good IFA, you don’t really need one: stay curious, interested, & learn as you go.

Have a look at the videos on https://www.kroijer.com, perhaps peruse https://www.mrmoneymustache.com & take a wander through https://ukpersonal.finance/flowchart/

 most of all, enjoy life in the meantime....as my dear Dad used to say: no point worrying, it’s only money!

Alexland

csgohan4 said:

Exactly, I've stopped putting extra into my mortgage repayments after getting below 60% LTV, as the offers are similar and the best below 60% LTV. My money in ISA's are making more than the interest I am losing to the lender. 

This chat got me thinking so I called our lender Santander and they are letting us switch our 20% mortgage to interest only (at the same fixed rate and term) without paying the ERC or any admin fees.

We already have enough across our S&S ISAs/LISAs to repay the mortgage and 25% of our current pensions value would also be enough to repay the mortgage so it seems reasonably low risk (unless stock markets have a greater than 50% negative absolute total return over the next 2 decades or worse with the additional contributions we will be making).

So that's great if we ever lost our jobs the IT smooth dividends from our S&S ISAs would be enough to cover regular mortgage interest payments with some to spare to cover bills and with lower outgoings we can now make greater use of our ISA allowances each year. Only downside is a bit less 123 Lite cashback each month.