Safe withdrawal rates query

BritishInvestor

zagfles said:

BritishInvestor said:

michaels said:

0.5%,1%,,,even 2% doesn't sound very much:

£5,000 - £20,000 per year managing a £1m pot for 40 years is £200,000 - £800,000 or between 20% and 80% of the amount of retirement income the retiree will spend....

That's a fair observation, but the average DIY investor probably trails the market by a reasonable amount every year so I'm not convinced it's always as clear cut as that (purely in terms of returns).

The average investor using a IFA probably trails the market by even more as they pay more in charges. Investment performance isn't the job of an IFA, even if they call themselves a "financial planner". Which is why they're no questions on it in the R04 "pensions and retirement planning" exam.

If you're after good performance, you'd look for a star fund manager, not an IFA. And some even question whether star fund managers even exist, and you might as well go passive, but that's another argument.

"The average investor using a IFA probably trails the market by even more "

Potentially, but looking at the Morningstar investor returns report, that would imply truly tragic returns!

" Investment performance isn't the job of an IFA, even if they call themselves a "financial planner"."

Someone calling themselves a financial planner would hopefully focus on the financial planning and less so on the commoditsed investment part. 

"Which is why they're no questions on it in the R04 "pensions and retirement planning" exam."

Not sure if you meant R02/AF4 rather than R04, but exams mean very little in terms of real-world experience.

zagfles

dunstonh said:

thread now “closed” due to being hijacked by someone with a “certificate”, another problem you avoid when you pay a professional :-) x

You wouldn't get a certificate by passing a pensions module.  The qualification comes from passing all of the modules.  Pensions are covered across 4 modules.   Also, you have to be member of the CII and the modules are sat at exam locations.  The cost would run into hundreds of pounds per module.   So, it is unlikely any consumer would attempt to sit one and get a result.

The full and comprehensive pension exam from the CII for the last decade or so has been J05 and that is a full written exam (not multi-choice) and any internet warrior claiming to have passed that without study is talking BS.

I don't know who this person with a "certificate" is. It's not me, I have no qualifications, I just did an R04 sample exam at home for fun. J05 looks fairly straightforwards too, it's stuff that gets discussed on this board all the time with input usually coming from regulars here who probably have no "certificate" or qualifications. Sometimes of course they talk rubbish or are wrong, but more worrying is how often those who do claim to have a "certificate" get things wrong!

Thrugelmir

Kim1965 said:

dunstonh said:

At 67 i will have sp and db index linked totalling 17.5 k, i need about 20k pa
I should have 200 to 250 dc and plan only to take the dividend income. 
 Is this a " safe *strategy?? 

Are you single or married/partner?     £20k is almost hit by two state pensions potentially.

Taking only dividend income from a diverse portfolio is safe in respect of the income need.  Although if you invest it badly, it wouldn't be safe.    100% in a bank share for example would have given a plentiful yield in the 90s and early 2000s but come the credit crunch, you would have lost the lost.

Pre-credit crunch, this website was full of DIY investors who preached the HYP strategy.   They all came a cropper in the credit crunch.  And then you had BP's issues which was also a staple of the HYP strategy.

Will be single, should have closer to 25k. Would only take money out of dc if theyears gone well. Spread over 25 +etfs so hopefully diversified

I would check rather than hope. Often an increased number of holdings reduces diversification rather than increases. Major indexes themselves are weighted to take into account of a number of factors. 

zagfles

BritishInvestor said:

zagfles said:

BritishInvestor said:

michaels said:

0.5%,1%,,,even 2% doesn't sound very much:

£5,000 - £20,000 per year managing a £1m pot for 40 years is £200,000 - £800,000 or between 20% and 80% of the amount of retirement income the retiree will spend....

That's a fair observation, but the average DIY investor probably trails the market by a reasonable amount every year so I'm not convinced it's always as clear cut as that (purely in terms of returns).

The average investor using a IFA probably trails the market by even more as they pay more in charges. Investment performance isn't the job of an IFA, even if they call themselves a "financial planner". Which is why they're no questions on it in the R04 "pensions and retirement planning" exam.

If you're after good performance, you'd look for a star fund manager, not an IFA. And some even question whether star fund managers even exist, and you might as well go passive, but that's another argument.

"The average investor using a IFA probably trails the market by even more "

Potentially, but looking at the Morningstar investor returns report, that would imply truly tragic returns!

" Investment performance isn't the job of an IFA, even if they call themselves a "financial planner"."

Someone calling themselves a financial planner would hopefully focus on the financial planning and less so on the commoditsed investment part. 

"Which is why they're no questions on it in the R04 "pensions and retirement planning" exam."

Not sure if you meant R02/AF4 rather than R04, but exams mean very little in terms of real-world experience.

Did you fail it then? Or maybe 1% above the pass mark  Sorry, but you do sound like someone with a vested interest. Are you an IFA or "financial planner"?

dunstonh

Not sure if you meant R02/AF4 rather than R04, but exams mean very little in terms of real-world experience.

I believe the reference is to R04 but that module is not about investments or strategies.  So, it's no surprise not to see it in there.  Pension taxation (or scenarios) is not in that module either    J05 was the best exam I have set that covered those.    If you only take one module of a collective, you are not going the overall picture.  Pensions also fall under R01, R02 and R03.     Unless you take R01 to R06, then you are not getting an overall picture.     And you don't really learn until about it properly until you actually start working and implement the knowledge that is important and disregard the knowledge that just allows you to pass exams.  That can take years.

My opinion is that R04 is one of the weaker modules.  Their attempts to split taxation and regulation and most suitable out of that module into others left very little covered.     It is enough for advice in the accumulation stage for post A day pension business but if I had my way, I would insist that any adviser giving advice on drawdown should have J05  or G60 or other similar exams from other exam boards.

BritishInvestor

michaels said:

BritishInvestor said:

michaels said:

0.5%,1%,,,even 2% doesn't sound very much:

£5,000 - £20,000 per year managing a £1m pot for 40 years is £200,000 - £800,000 or between 20% and 80% of the amount of retirement income the retiree will spend....

That's a fair observation, but the average DIY investor probably trails the market by a reasonable amount every year so I'm not convinced it's always as clear cut as that (purely in terms of returns).

I would be surprised if my global tracker trailed the market by more than the total 0.15% fund plus platform charges.

Looking at the best buy fund tables would suggest you aren't the average DIY investor.

westv

I was surprised jamesd hadn't popped his head into this thread but I see he hasn't been around for a few months.

Albermarle

westv said:

I was surprised jamesd hadn't popped his head into this thread but I see he hasn't been around for a few months.

Not since the start of the year, and before that he was quite prolific .