Looking for advice 5 years from retirement

RichardS

I’m 57 in a few days and I’m hoping to retire at 62 if I can. I am on a salary of approx 60k and currently have two pensions and a stocks and shares ISA.  I am due the full state pension at 67. 

My company pension (I pay in 12%, my employer 4%) is with Scottish Widows and currently has around £30k in it.  

I have a Stocks and Shares ISA with Nutmeg which I pay £400 into each month and currently has around £25k in it.

I have a personal pension managed through a Financial Advisor - this is invested in Fidelity funds and through my Financial Advisor’s Wealth Management Service which has fees of 1.3%. I pay £400 a month into this and the value of the pension is currently around £195k.  It recently crept over £200k for a short while but has slipped under that again recently.  They (my FA) also offer a low cost service which they charge 1% for but where the fund allocation is only re-allocated annually. 

According to my FA the return on my pension is currently 3.15% after charges. This is at a low point - at its highest point it was returning between 5-6% after charges. 

Now I’m nearing retirement I’m wanting to make sure I am on top of all this a bit more than I have been.  I have a couple of questions really:

1.  I’m worried that the 1.3% charge on my main personal pension is just eating away at any gains I could be making and I’m wondering if I should just look to transfer this pension into something with lower charges?  Are there any obvious places I could transfer this into and get better value?  I would not want to be hands on with the pension as I don’t know enough about investing (as you can probably tell!) but I would hope to have the funds monitored more regularly than annually.  I have always been a pretty medium risk person but I think now I‘m getting nearer retirement I am more risk averse and would probably say I’m a 2 out of 5 on the risk scale. 

2. With a pension fund should I be worried at all about the safety of the fund i.e is it ok to have more than £85k invested in one place?  I know people consolidate pensions but is this not an issue?

Any advice would be appreciated especially if there is anything very very obvious that I might be doing wrong!!!!   Thank you and sorry for the basic questions if they seem basic 😀

Dazed_and_C0nfused

Is there a particular reason you are using a financial advisor and not an IFA?

RichardS

Good question. I have no idea really (sorry!). I am certainly not tied to them in any way, hence my question about whether or not I should move the pension

jimjames

Could you pay more into your company pension to get that employer contribution up? Is that the maximum they add? You might find it's better to add more to the company pension if that has lower charges.

In terms of risk, you need to think about what you intend doing with your pension at retirement. Are you planning to buy an annuity or use drawdown? If drawdown and it has to last 20+ years then you will probably still want to keep some equities there to ensure it grows to beat inflation over that time.

JohnWinder

The fee you mentioned seems high, but by the end of it all you’ll be able to say ‘My investments helped put two children through private schooling, my financial managers’ children’. There is an alternative however, but it means a bit of self-education on personal finance. Are you up for it?

NoMore

Pensions, annuities & retirement planning — MoneySavingExpert Forum Probably more appropriate sub forum

Dazed_and_C0nfused

JohnWinder said:

The fee you mentioned seems high, but by the end of it all you’ll be able to say ‘My investments helped put two children through private schooling, my financial managers’ children’. There is an alternative however, but it means a bit of self-education on personal finance. Are you up for it?

Harsh.  But probably true!

Linton

What income will you require in retirement?  Have you worked out where the money is coming from?  Your current total wont support someone used to a £60K income.  Do you have other income - eg DB pensions?

********

On safety - this has been asked many times on this forum and the answer is always the same. There is an £85K FSCS compensation limit but no-one has come up with a scenario where this could be breached.

The key point is that when you deposit money in a bank it becomes the bank's money.  All you have is a promise by the bank to pay it back.  When you buy a regulated mainstream investment through a regulated mainstream intermediary the investment remains yours.   Intermediaries just have the right to manage it but it is ring-fenced and so not available for the intermediary's own use. 

The biggest risk that has been mentioned here is that if an intermediary goes bust the most likely outcome is that the business is bought by another company as you as a customer are a valuable asset.  So it seems possible that there could be disruption during the cange-over

Albermarle

RichardS said:

I’m 57 in a few days and I’m hoping to retire at 62 if I can. I am on a salary of approx 60k and currently have two pensions and a stocks and shares ISA.  I am due the full state pension at 67. 

My company pension (I pay in 12%, my employer 4%) is with Scottish Widows and currently has around £30k in it.  

I have a Stocks and Shares ISA with Nutmeg which I pay £400 into each month and currently has around £25k in it. At your age it makes sense to add more to a pension than to a S&S ISA. With the pension you get tax relief, and as you are 57 you can access it when you like. Nutmeg are not cheap either.

I have a personal pension managed through a Financial Advisor - this is invested in Fidelity funds and through my Financial Advisor’s Wealth Management Service which has fees of 1.3%. I pay £400 a month into this and the value of the pension is currently around £195k.  It recently crept over £200k for a short while but has slipped under that again recently.  They (my FA) also offer a low cost service which they charge 1% for but where the fund allocation is only re-allocated annually. What does the 1.3% include. Does it include the advisor charge, the pension platform charge and the investment fund(s) charge? If it includes everything then 1.3% is not too bad.

According to my FA the return on my pension is currently 3.15% after charges. This is at a low point - at its highest point it was returning between 5-6% after charges. To be fair most pension/investment funds have been struggling in the last couple of years, so not that surprising

Now I’m nearing retirement I’m wanting to make sure I am on top of all this a bit more than I have been.  I have a couple of questions really:

1.  I’m worried that the 1.3% charge on my main personal pension is just eating away at any gains I could be making and I’m wondering if I should just look to transfer this pension into something with lower charges?  Are there any obvious places I could transfer this into and get better value?  I would not want to be hands on with the pension as I don’t know enough about investing (as you can probably tell!) but I would hope to have the funds monitored more regularly than annually.  I have always been a pretty medium risk person but I think now I‘m getting nearer retirement I am more risk averse and would probably say I’m a 2 out of 5 on the risk scale. If you do not want to be hands on then probably you are better staying with paying for some level of advice. AS said 1.3% all in is not too bad, but depends if this is all the charges, or not.

2. With a pension fund should I be worried at all about the safety of the fund i.e is it ok to have more than £85k invested in one place?  I know people consolidate pensions but is this not an issue? As long as you stay with mainstream providers it is not an issue.

Any advice would be appreciated especially if there is anything very very obvious that I might be doing wrong!!!!   Thank you and sorry for the basic questions if they seem basic 😀

On a more general note, you should be looking at your expenditure now, and how that might change ( or not ) in retirement. Then you can better see how much you really need to build up before retiring. You advisor should be able to help with that.

LHW99

 I am due the full state pension at 67

Have you actually checked that, and read all the page? You are under transitional rules so could need anything between around 29 and 49 contribution years (from what others have said here).

RichardS

LHW99 said:

 I am due the full state pension at 67

Have you actually checked that, and read all the page? You are under transitional rules so could need anything between around 29 and 49 contribution years (from what others have said here).

Yes I think I did check that. I’ve worked continuously since 22 so have 35 contribution years so far