I'm in a panic about retirement, pensions and investments - talked to SJP and my bank

Dulce-ridentem

It's a good problem to have. We have always been financially prudent and have been lucky enough to have substantial savings and pension pot, with some DB pension as well.

How do I find a good IFA who can help plan the best route to mix drawdown of pensions and minimise tax? I know it's a repeat question on MSE forums but I haven't found a recent answer and have some specific wrinkles.

I don't want to work hard at investments. I do want to manage tax effectively. I have no dependents and want to die broke (and enrich some charities, ultimately)! We've gradually built up our assets over 40+ years of hard work and I'm so used to saving I don't know how to spend.

Half our savings are in fixed term bonds and half with a major bank for whom we are 'high net worth' customers. The bank have delivered about 6% TWRR over the past 9 years  (that's the equivalent annual growth rate if compounded). They have also been awful at communication.

SJP would love to manage our cash and our pensions (!). They charge more than the bank but the IFA involved would probably add value through tax wrappers and advising on drawdown strategies (so we live off a mix of capital and income and minimise tax). I'm a little unsure about some of his recommendations as the fees are high and I can't see the advantages (offshore bonds with 12% fees over first 5 years, and SJP taking over one of my pensions that guarantees 3.5% pa after fees which is modest but secure...)

We've got some big bonds just maturing this week that usually I'd shove into the best rate I can get, currently pretty good - I keep to 85K per institution. Of course SJP say don't do that. So I'm getting anxious and I know I shouldn't make such a big decision quickly.

How do I find an IFA who can help with this? I don't think the bank will step up given their past performance. The SJP IFA is bearable as salespeople go but I can see MSE don't like SJP. I've read the reports saying SJP funds perform poorly but SJP say those reports are inaccurate ...

I know I'm lucky but it actually feels like a burden! Where do I go for advice, please?

Pat38493

Unless I'm missing something, you have not been talking to an IFA.  The I stands for "Independent" - if the person works for SJP then per definition they are not an IFA.

There is a link that people often quote here, and you should check the filter "confirmed independent".

https://adviserbook.co.uk/financial-adviser/s/wa4+3le?dist=10

SJP are mentioned here quite often as being very expensive and sometimes trying to lock you in for a long time with hefty fees, exit fees and putting you in overly complicated and expensive products (I am paraphrasing other posts I've seen).

That said, maybe they offer value if you are extreme high net worth and you require specialist services.  I can't really comment there.  There are quite a few people on these boards who are learning how to DIY their pensions so they probably won't be too keen on very expensive wealth management companies.

My rule of thumb is that I would not sign up to any pension provider or adviser who had exit fees - if they are really good, they should not need to lock me in with exit fees.

dunstonh

How do I find a good IFA who can help plan the best route to mix drawdown of pensions and minimise tax? 

Pretty easily.   The main issues with IFAs is not the quality of advice but the cost differences.  Though the majority will be cheaper than SJP.  Some by a very long way.   However, some have seen SJP prices and upped their charges to match.  If SJP can get away with it, then some IFAs feel they can too.   

 I'm a little unsure about some of his recommendations as the fees are high and I can't see the advantages (offshore bonds with 12% fees over first 5 years, and SJP taking over one of my pensions that guarantees 3.5% pa after fees which is modest but secure...)

I havent arranged an offshore bond in over a decade.   Its  highly niche product that fits a certain set of circumstances but the local SJP rep in our area sells them like hotcakes - that is from anecdotal conversations between local IFAs repeatedly finding people with offshore bonds in justifiable but pointless trusts.  We joke that it's their way of preventing IFAs from taking over that client as offshore bonds and trusts can be difficult to unwind.

 The SJP IFA is bearable as salespeople go but I can see MSE don't like SJP.

SJP are FAs/sales reps.  They are not IFAs.

I've read the reports saying SJP funds perform poorly but SJP say those reports are inaccurate ...

Independent research agrees with reports you have read.

Albermarle

Just to add that any financial advisor will probably suggest/advise that you invest more, and have less cash savings ( as from your post you seem to be rather cash rich and keen on savings accounts)
If you were cynical you could say that is probably because they earn more money that way. However most of the DIY investors on this forum will be mainly invested rather than being too cash rich, as history shows that cash loses out to inflation in the long run.
Probably in the current climate there has been a temporary swing towards cash by some, but long term an advisor will advise anybody planning to drawdown to keep mainly invested, as the consensus is that this is the least risky route long term.

Dulce-ridentem

Many thanks to those who've replied - useful input. Should have registered SJP as not being independent - a good friend recommended them and perhaps the salesman has described things in a way that didn't make it very clear - but of course you are right.

We are indeed cash heavy (my husband is ultra-cautious, although we do discuss the fact that leaving money doing nothing can be high risk). I think he's persuadable to move more out of cash but I don't like to push him out of his comfort zone.

Essentially we are trying to use our savings to provide what we need to live on, as our pensions are not great. There should be enough but managing tax carefully will make a big difference. @dunstonh you say "the main issues with IFAs is not the quality of advice but the cost differences" - is this true also when it comes to tax advice? I think that's the main thing I need to work out - when to take from which vehicle to minimise both CGT and income tax.  Should I look for any particular experience or qualification in this area? I've had a few genuinely independent IFAs over the years and they seemed to recommend the funds that were fashionable, sometimes with poor outcomes though on average ok. We have had some stinkers of investments.

I have another question - is the 6% pa (compounded) from our bank ok performance since 2015? How do I compare performance (given fees vary, are the usual graphs fair comparisons?

Thanks again.

Qyburn

Annual 6% was a good return when interest and inflation were low, but last year or so it's less than inflation so losing in real terms. What was the investment that gave that consistent return?

JohnWinder

https://www.evidenceinvestor.com/find-an-adviser/.  It's in UK, despite .com. Don't be spooked.

dunstonh

@dunstonh you say "the main issues with IFAs is not the quality of advice but the cost differences" - is this true also when it comes to tax advice?

In respect of tax efficiency of what wrappers to use, which ones to draw against, allowances etc, then that is IFA bread and butter.   For many people, that is the most important part of what an IFA does.

Should I look for any particular experience or qualification in this area? 

No. Not really.  There is a problem with qualifications that the exam boards change the exams over the years and there are multiple exam boards.   So, I could say look for an adviser with J05 qualification but another could have G60 or a different exam board version.   However, nothing you have said indicates any need for further qualifications (and I say that as someone with further qualification)

 I've had a few genuinely independent IFAs over the years and they seemed to recommend the funds that were fashionable, sometimes with poor outcomes though on average ok. We have had some stinkers of investments.

Things have developed a lot.   The classification of IFA and the requirements on IFAs changed heavily in 2013 with the RDR, then a few years later with RMAR, then MiFIDII and more recently a firming up of things that most were already doing with the Consumer Duty.     There is a lot more governance and due diligence nowadays.  A structure and process with evidence based recommendations with audit trails to match.

Dulce-ridentem

@qyburn that's the effective rate we've achieved over the period - the equivalent rate had it been the same throughout and all  interest reinvested.  Actual rate has been all over the place, between -8.7% and +20% in the past 5 years. It's just our bank's "dynamic" portfolio (level of risk 4/5 - high risk balanced by the large cash holding).

Dulce-ridentem

@dunstonh thank you again, that's really helpful.

Dulce-ridentem

@JohnWinder - thanks, I've followed that up! 

The comments here have given me confidence to look wider before leaping...thanks!