What pension planning advice do I need?

barnstar2077

I would also recommend you check out pensioncraft on YouTube.  He has a great way of explaining things and he has covered a lot of topics so far.  He literally wrote the book on finance. 

LV_426

dunstonh 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.

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

So you see my problem here. Even in this thread there are conflicting pieces of advice. So I'm still unsure as to whether going to an IFA would be a waste of money, or in fact could help me a lot in the long run. 
To me £3k is a lot money, and I would have to raid my ISA to pay for it. I've got to be sure it's worth it.

dunstonh

ajfielden said:

dunstonh 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.

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

So you see my problem here. Even in this thread there are conflicting pieces of advice. So I'm still unsure as to whether going to an IFA would be a waste of money, or in fact could help me a lot in the long run. 
To me £3k is a lot money, and I would have to raid my ISA to pay for it. I've got to be sure it's worth it.

Investing has a lot to do about opinion.  If you asked 100 people to build a portfolio of funds you would get 100 different outcomes.  The same with advisers too.

primarily, an advisers most important requirement is suitability to you.   A lot of new DIY investors go above their risk profile and fashion invest.  A lot start out with the intention of monitoring the portfolio but then give up. as they realise its actually quite boring if you are doing investing correctly.  It isn't the buzz they thought it would be.    So, a lot of what will be right or wrong for you will depend on you, you knowledge, understanding, your own research etc.

Some people are returns focused.  Some people are charges focused.  ie. the returns focused people will go with investments they feel are the best irrespective of the cost (within reason).   Charges focused will go with the lowest cost as priority even if it may not be the best option.  

Some people will go passive only. Others are active only. Others a hybrid of the two.   Some refuse to believe any active fund is suitable and that those that have higher returns through the inclusion of some active are just lucky.  In some cases they may be right.  In other cases they may be wrong.   Its all opinion and personal view.

OldMusicGuy

Here's what you need:

- Advice on your early retirement plans, do you have "enough". No IFA is going to do that in a single meeting. Too much research needed. Maybe you should go to a financial planner for that, but TBH I think that's something only you can decide. No third party can really tell you if you have "enough", and even if they do, their "enough" statement will be so heavily caveated that it won't be worth the paper it is written on IMO. You have to get yourself in the right mindset to retire. FWIW I was planning to retire at 63/64 but went at 60 because of work stress. Those extra 3/4 years would have helped create a much more comfortable cushion in my plans but I took the leap 0of faith and it's worked out fine (I was being too cautious).

- Dealing with your non-DB pensions. You might want to look at consolidating your various non-DB schemes into a single SIPP. You can pay an IFA to do that or you can do it yourself. Unless you have schemes with guarantees or some sort of hybrid setup, it costs nothing (or very little). You can do it yourself quite easily (I did). Or you can pay an IFA to do it, saving you some time but likely costing a few thousand pounds (for something that may cost nothing). There are plenty of threads on here about consolidating pensions and you should just ask questions in this forum if you have them. 

- Deciding your investment strategy for your DC pensions, whether they are multiple or consolidated. An IFA can definitely help with this but like me and many others on here, you can adopt a simple, low cost strategy without an IFA and save a lot of money over the course of your retirement.

LV_426

Definitely some food for thought here, and I need time to digest it. But as I'm looking at these things with 5 years to go, I do have time.

Interestingly the IFA I've been speaking to said my plan to retire at 60 was attainable. This is after I gave him details of all my pension pots and savings. Although he didn't elaborate, I have a good idea of how it can be achieved myself.

The Mrs and I were just discussing ISA vs drawdown. Probably something that comes up a lot here, so apologies if this is an FAQ, but what are the tax issues around drawing an income from these two sources? With a pension drawdown, I think this is taxed at source. So any money you get from it has already been taxed according to income tax rules. What happens with an ISA? Because at the moment I can dip into that whenever I wish, without paying tax. So it seems to me that using an ISA has a big advantage, as it's not counted as taxable income. Am I correct in saying that?

OldMusicGuy

ajfielden said:

The Mrs and I were just discussing ISA vs drawdown. Probably something that comes up a lot here, so apologies if this is an FAQ, but what are the tax issues around drawing an income from these two sources? With a pension drawdown, I think this is taxed at source. So any money you get from it has already been taxed according to income tax rules. What happens with an ISA? Because at the moment I can dip into that whenever I wish, without paying tax. So it seems to me that using an ISA has a big advantage, as it's not counted as taxable income. Am I correct in saying that?

Pensions have a big tax advantage on the way in (because of pension tax relief), ISAs don't. ISA withdrawals are all tax free, 25% of DC  pension withdrawals are tax free, which you can take as a lump sum, a partial lump sum (through crystallization) or each time you do a drawdown withdrawal (UFPLS). So if you retire and don't have income (like me) you can withdraw up to 12,570 plus 25% from a pension without paying any tax each year. 

Using a combination of both makes the most sense.

QrizB

ajfielden said:

The Mrs and I were just discussing ISA vs drawdown. Probably something that comes up a lot here, so apologies if this is an FAQ, but what are the tax issues around drawing an income from these two sources? With a pension drawdown, I think this is taxed at source. So any money you get from it has already been taxed according to income tax rules. What happens with an ISA? Because at the moment I can dip into that whenever I wish, without paying tax. So it seems to me that using an ISA has a big advantage, as it's not counted as taxable income. Am I correct in saying that?

In very general terms, pensions are paid into with pre-tax (and potentially pre-NI) money but are taxed when you withdraw. ISAs are funded with taxed money but are then tax-free when you take it out again.

There is usually a small tax advantage in using a pension rather than an ISA but until you're 55 you can't get at the pension money while an ISA can be accessible immediately.

Albermarle

There is usually a small tax advantage in using a pension rather than an ISA but until you're 55 you can't get at the pension money while an ISA can be accessible immediately.

Except in unusual circumstances the minimum tax benefit for a pension is 6.25% and in some  circumstances can be significantly higher .

o you see my problem here. Even in this thread there are conflicting pieces of advice

That is because there is no definitive right or wrong answer . It is like saying is it better to try and fix my car myself, or is it better to take it to the garage . It all depends on many factors.

Also be aware that on this forum there are some actual financial advisors ( posting in a personal capacity) and a number of people who are  anti financial advisors.

Also as it is an active pensions forum , most regular posters are reasonably knowledgeable DIY investors , which probably does not reflect what happens in the wider public arena.

LV_426

Albermarle said:

o you see my problem here. Even in this thread there are conflicting pieces of advice

That is because there is no definitive right or wrong answer . It is like saying is it better to try and fix my car myself, or is it better to take it to the garage . It all depends on many factors.

Oh in my case that is a no-brainer, as I know nothing about cars and lack the experience or skill to fix them. In fact last time I had a go at fixing my wife's car I burnt out the main wiring loom!! Expensive mistake. Hopefully my DIY attempts at pension planning will not have the same disastrous consequences.
So this forum is probably extremely biased against IFAs because of the knowledgeable people here. Also something to bear in mind. I will keep an open mind though.

OldMusicGuy

ajfielden said:

Oh in my case that is a no-brainer, as I know nothing about cars and lack the experience or skill to fix them. In fact last time I had a go at fixing my wife's car I burnt out the main wiring loom!! Expensive mistake. Hopefully my DIY attempts at pension planning will not have the same disastrous consequences.
So this forum is probably extremely biased against IFAs because of the knowledgeable people here. Also something to bear in mind. I will keep an open mind though.

I certainly see little reason to use IFAs but I hope I come across as objective in my posts about them. I understand why some people might want to use them, if you do please make sure it is a genuinely independent one.

The car analogy is a nonsensical one. Same as the analogy for plumbers/electricians whatever. Mechanics, plumbers, electricians whatever charge by the hour, you get an estimate for the actual work and you know what they are going to do. If the car still doesn't work, you have some comeback against them.

IFAs/FAs do not charge by the hour, you have no idea what they are doing for their money and even if your portfolio performs appallingly, they will still charge you for it every year. It's like a car mechanic failing to repair your car properly but still getting you to pay for it every year you use the car. 

I will repeat what I said earlier. If you are using an IFA or a car mechanic, it pays to have some knowledge so you know the questions to ask. Example - one of my cars has an air con problem. I've researched this online to identify the likely problem so I can tell the garage what to try first rather than have them try various things that likely won't have any effect, but will allow them to charge me money. Mechanics are like IFAs and vice versa. Some are good, some aren't and unless you have some knowledge it's hard to know if you are getting good service or not.