What pension planning advice do I need?

Albermarle

Ok let me switch the question around. Are there cases where getting help from a financial advisor is considered wise, for pension planning?

Yes, if you were clueless about these matters and had no interest or intent or ability to rectify this then an IFA would be useful.

Otherwise IFA can help if your finances are complex , or your family situation is complex  and/or the sums of money involved are large . Often the pension can get more complicated in the withdrawal stage than the accumulation stage and as you get older and/or your spouse/partner will need help if you die , that could be another reason.

Let me tell you what's worrying me most about this: It's because you don't get a second chance to plan your finances for retirement. There's only one go at it, and you can't rewind time to do things differently. And we're talking about your financial stability for the rest of your life.

Well that is what worries everybody and partly why many of us participate in this forum . If it keeps you awake at night then what you pay an IFA would be worth it . For others forking out the IFA fees would be what would keep them awake . It is a personal choice in the end .

Nebulous2

ajfielden said:

Let me tell you what's worrying me most about this: It's because you don't get a second chance to plan your finances for retirement. There's only one go at it, and you can't rewind time to do things differently. And we're talking about your financial stability for the rest of your life.

I'm somewhat impulsive, having twice given up a job I was no longer enjoying for a lower paid position. I've become acutely aware however that decisions I make now have a higher risk attached to them, as I no longer have the time to recover from any mistakes. We've had that discussion and are agreed on a way forward. 

You said your DB pension will provide a main plank for your future, and you have numerous other pensions. How close is the DB pension to meeting your needs? Is there anything you can do to align the two? 

We bought a second house / holiday home three years ago in a cheaper area that we knew well. We also bought a new vehicle / newer caravan / new boiler in the last year - 18 months, to reduce some of the risks of big expenditure in retirement.  

Retiring now at 59, we sold our main home, moved into the holiday home, slashing our living costs and I've just put my DB pension into payment. I've also taken a part-time job. 

We are in a place where our outgoings have been dramatically reduced. My DB pension alone would meet our basic needs, without luxuries. I have taken a part-time job, which with the pension, and no NI on my pension leaves me not far off the income I had before, with considerably lower expenses. We also have the cushion of having invested the money we received for our house. On reaching state pension age it looks like we will be better off than we have ever been. 

Your dilemma isn't necessarily about financial advice. Its about how close are you to meeting your income number that you require in retirement. Its also about whether having identified a gap, there are things you can do to narrow that gap. Maximising your income and tax benefits are certainly part of it, but thinking about reducing your needs in retirement may also have something to yield. 

OldMusicGuy

ajfielden said:

Ok let me switch the question around. Are there cases where getting help from a financial advisor is considered wise, for pension planning?

Let me tell you what's worrying me most about this: It's because you don't get a second chance to plan your finances for retirement. There's only one go at it, and you can't rewind time to do things differently. And we're talking about your financial stability for the rest of your life.

You do get a second chance. You get as many chances as you want. I started out paying a financial adviser to set up a complex portfolio for me which turned out to be not what I wanted. I sold it all and set up my own portfolio. Along the way, I thought investing in an actively managed income fund was a good way to generate income in retirement, After all, these star fund managers have to know so much more than me, right? Wrong!! I chose a certain Mr Woodford (just Google Neil Woodford if you haven't heard of him). Fortunately for me I knew enough to see the warning signs and got out before any major losses. And so I ended up with a simple, low cost, multi-asset fund-based portfolio.

When I started out I hadn't paid much attention to investing, assuming that the "experts" knew better than me. They don't. IFAs (and FAs) know no more than you or I. They have no more knowledge about what is happening in the global economy than you or me, they don't have any inside knowledge that can make you more money or avoid losses. They are not investment managers. What they do know is which funds/investments might be suitable for your risk profile (but you can find this out if you want to), and they can help if you have complex financial affairs.
 

squirrelpie

ajfielden said:

Let me tell you what's worrying me most about this: It's because you don't get a second chance to plan your finances for retirement. There's only one go at it, and you can't rewind time to do things differently. And we're talking about your financial stability for the rest of your life.

You do get a second chance, or rather you have as many chances as you decide to have. Your DB pension and your state pension are a given, although you might be able to vary them a bit. Your 'pot of money' in your DC schemes is a given. But you get to choose how you spend your DC pot and unless you decide to commit it all to an annuity, you get to make multiple decisions over the years about how much to draw out from where and when. And you also get to decide whether to move one or more bits of the pot to join other bits, or even to separate a bit to make a new pot.

So the question is whether your DB pension plus your state pension plus say 3.5% of your DC pot is enough to live on each year, and keep you happy. If it is then you're fine and can worry about the details as you go along. If it isn't then you need to do something: save harder, get some advice about how to use the money better, and/or adjust your expectations of what you need/want.

LV_426

OldMusicGuy said:

ajfielden said:

Ok let me switch the question around. Are there cases where getting help from a financial advisor is considered wise, for pension planning?

Let me tell you what's worrying me most about this: It's because you don't get a second chance to plan your finances for retirement. There's only one go at it, and you can't rewind time to do things differently. And we're talking about your financial stability for the rest of your life.

You do get a second chance. You get as many chances as you want. I started out paying a financial adviser to set up a complex portfolio for me which turned out to be not what I wanted. I sold it all and set up my own portfolio. Along the way, I thought investing in an actively managed income fund was a good way to generate income in retirement, After all, these star fund managers have to know so much more than me, right? Wrong!! I chose a certain Mr Woodford (just Google Neil Woodford if you haven't heard of him). Fortunately for me I knew enough to see the warning signs and got out before any major losses. And so I ended up with a simple, low cost, multi-asset fund-based portfolio.

When I started out I hadn't paid much attention to investing, assuming that the "experts" knew better than me. They don't. IFAs (and FAs) know no more than you or I. They have no more knowledge about what is happening in the global economy than you or me, they don't have any inside knowledge that can make you more money or avoid losses. They are not investment managers. What they do know is which funds/investments might be suitable for your risk profile (but you can find this out if you want to), and they can help if you have complex financial affairs.
 

Just reading up about the Woodford disaster. You did very well to get yourself out of that one.

The IFA has sent me a document with many questions about my attitude to risk. Kind of fits in with your description of them matching risk tolerance to funds. 

Is that really all they are doing for their £3k initial investment fee? But I suppose you're paying for their years of experience doing it, which I don't have.

LV_426

squirrelpie said:

ajfielden said:

Let me tell you what's worrying me most about this: It's because you don't get a second chance to plan your finances for retirement. There's only one go at it, and you can't rewind time to do things differently. And we're talking about your financial stability for the rest of your life.

So the question is whether your DB pension plus your state pension plus say 3.5% of your DC pot is enough to live on each year, and keep you happy. If it is then you're fine and can worry about the details as you go along. If it isn't then you need to do something: save harder, get some advice about how to use the money better, and/or adjust your expectations of what you need/want.

Yeah that is the question. But some of my DC pot will be eaten up getting us through the 5 years until those other pensions kick in.

OldMusicGuy

ajfielden said:

Is that really all they are doing for their £3k initial investment fee? But I suppose you're paying for their years of experience doing it, which I don't have.

Yup, that's what you're paying for (and also for every year after that regardless of performance if you accept ongoing advice).  The years of experience counts for little IMO. They just have more time to research the funds that are out there and may be able to help with more complex financial planning issues if you have them. They may also have a team of people that does some of the research for them (if they are more than a one man band).

I've selected a set of funds (just three funds, nothing complex) that is performing perfectly adequately to meet my objectives. No experience needed, just an understanding of my objectives and risk profile. And why a low cost, well diversified portfolio is a viable investment option to consider.

When I engaged an adviser, they set up a portfolio that turned out to be wrong for me. But that was largely my fault, not theirs. Because I didn't understand the basics of investing (and I mean the basics), I was far too risk averse and that was reflected in their fund selection (because I told them to be ultra cautious). By educating myself I now have a much more realistic approach to investing and risk, despite my cautious nature. If I engaged an adviser now, I would instruct them very differently. But because I educated myself, I feel I don't need an adviser. Of course, YMMV.

That's why I would still strongly advise you to get more knowledge even if you do ultimately decide to go with an IFA.    

LV_426

Hm interesting. Think I'll hang around here for a bit and see what I can learn. I'll also read that book. Go easy on me though, I'm a rookie

I have been mighty impressed with my ISA fund, which has about £90k in it. I just have the one fund, but it's been doing well. I withdrew £10k in January to help with a house move, and it's made back half that value already.

dunstonh

Is that really all they are doing for their £3k initial investment fee? But I suppose you're paying for their years of experience doing it, which I don't have.

No it's not.  However, for simple transactional cases, there is less to offer than for ongoing servicing.

Don't assume going DIY will save you money.  The UK's largest DIY platform has two of their own brand funds in their top 10 sellers and they are more expensive than most IFA ongoing advice portfolios.

Just reading up about the Woodford disaster. You did very well to get yourself out of that one.

One of the major IFA research providers issued warnings about Woodford 2 years before it failed.   So, the information was available should you have chosen to take an interest.  Not everyone does.  Too many read the newspapers and marketing lists from platforms and go with those.

JohnWinder

dunstonh said:

 ...are more expensive than most IFA ongoing advice portfolios.

What is the median cost of IFA ongoing advice portfolios currently?