Looking for advice 5 years from retirement

RichardS

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?

I don’t really know whether I’m up for it but your comment has made me think!  Thank you 😊 

Albermarle

RichardS said:

Andreg said:

Are your company pension contributions done by salary sacrifice?  If so, you should make additional contributions to your company pension instead of  your personal pension, as salary sacrifice contributions reduce your National Insurance contributions.

Yes they are. I did look at increasing my % a little bit but it came up with a warning about my contributions being above £10k which may have tax implications so I thought I would check this out first. Does that sound likely - that going over 10k would cause this?

Perhaps some confusion here.
There is a limit called the MPAA, which was £4K but is now £10K.
It only applies if you have previously taken any taxable income from a pension. If you have not then your only constraints are that you can not add more than your gross salary, and the total contributions in a tax year including employer contributions, your contributions and tax relief should be no more than £60K

Albermarle

boingy said:

I'd echo most of the above advice. If you only do one thing then it should be to transfer the pension away from the FA wealth management service to a lower cost provider. Those fees are brutal and you don't need to be paying them.

Your company scheme will have someone you can talk to. Ask them how much more you can put into the company pension each month and aim to max those contributions and reduce the other payments accordingly. It might also be possible to transfer the other pension into the company one but seek some advice about that and pay attention to exit and transfer fees. 

1.3% all in for an advised portfolio is not particularly 'brutal' . Of course you can DIY cheaper, but OP seems not so keen on that.
My worry is that the 1.3% is not the full cost, and that there might still be fund charges on top which are often less obvious, and the OP has not clarified this yet. If it was closer to 2% altogether than that is for sure too much.

boingy

Albermarle said:

boingy said:

I'd echo most of the above advice. If you only do one thing then it should be to transfer the pension away from the FA wealth management service to a lower cost provider. Those fees are brutal and you don't need to be paying them.

Your company scheme will have someone you can talk to. Ask them how much more you can put into the company pension each month and aim to max those contributions and reduce the other payments accordingly. It might also be possible to transfer the other pension into the company one but seek some advice about that and pay attention to exit and transfer fees. 

1.3% all in for an advised portfolio is not particularly 'brutal' . Of course you can DIY cheaper, but OP seems not so keen on that.
My worry is that the 1.3% is not the full cost, and that there might still be fund charges on top which are often less obvious, and the OP has not clarified this yet. If it was closer to 2% altogether than that is for sure too much.

1.3% absolutely is brutal by modern standards, although it's not uncommon for folks to be paying that because they don't really understand. More than half his monthly payments are eaten up by fees. He should be aiming for 0.5% and/or a cap on the total amount. 

Andreg

RichardS said:

Andreg said:

Are your company pension contributions done by salary sacrifice?  If so, you should make additional contributions to your company pension instead of  your personal pension, as salary sacrifice contributions reduce your National Insurance contributions.

Yes they are. I did look at increasing my % a little bit but it came up with a warning about my contributions being above £10k which may have tax implications so I thought I would check this out first. Does that sound likely - that going over 10k would cause this?

Assuming you havent previously taken any pension income or tax free cash, then you can pay up to £60k into a pension and get tax relief, plus if the payments are made my salary sacrifice you will save NI too.  You should be able to sacrifice all your salary above the minimum wage into your pension and benefit from large NI savings.  If you do so, remember to stop contributing to your personal pension!

If your financial advisor has failed to advise you of this, and is happily benefiting from fees on the money you invested with them, that does appear to be very bad advice.  You may want to discuss this with them and maybe get independent advice on claiming against them for the lost opportunity of doing salary sacrifice earlier.

RichardS

Andreg said:

RichardS said:

Andreg said:

Are your company pension contributions done by salary sacrifice?  If so, you should make additional contributions to your company pension instead of  your personal pension, as salary sacrifice contributions reduce your National Insurance contributions.

Yes they are. I did look at increasing my % a little bit but it came up with a warning about my contributions being above £10k which may have tax implications so I thought I would check this out first. Does that sound likely - that going over 10k would cause this?

Assuming you havent previously taken any pension income or tax free cash, then you can pay up to £60k into a pension and get tax relief, plus if the payments are made my salary sacrifice you will save NI too.  You should be able to sacrifice all your salary above the minimum wage into your pension and benefit from large NI savings.  If you do so, remember to stop contributing to your personal pension!

If your financial advisor has failed to advise you of this, and is happily benefiting from fees on the money you invested with them, that does appear to be very bad advice.  You may want to discuss this with them and maybe get independent advice on claiming against them for the lost opportunity of doing salary sacrifice earlier.

That’s interesting. Thanks for that!

ColdIron

Andreg said:

RichardS said:

Andreg said:

Are your company pension contributions done by salary sacrifice?  If so, you should make additional contributions to your company pension instead of  your personal pension, as salary sacrifice contributions reduce your National Insurance contributions.

Yes they are. I did look at increasing my % a little bit but it came up with a warning about my contributions being above £10k which may have tax implications so I thought I would check this out first. Does that sound likely - that going over 10k would cause this?

Assuming you havent previously taken any pension income or tax free cash, then you can pay up to £60k into a pension and get tax relief

Taking a PCLS (tax free cash) won't, in itself, trigger the MPAA, only taking an income will do that

E.g. you take a PCLS while moving into flexi access drawdown and leave the crystallised funds there

LHW99

Assuming you havent previously taken any pension income or tax free cash, then you can pay up to £60k into a pension and get tax relief, plus if the payments are made my salary sacrifice you will save NI too.  You should be able to sacrifice all your salary above the minimum wage into your pension and benefit from large NI savings.  If you do so, remember to stop contributing to your personal pension!

Just to emphasize, the above is provided your gross income is at least £60k per annum. Otherwise you are limited to your gross income.

If your annual income is much more than £60k, and you are able to pay £60k into a pension then you would potentially be able to use the "carry forward" rules that allow you to use up any of the unused annual allowance from the previous 3 years (remember that previously it was only £40k pa) by eg adding money from savings.

JohnWinder

If you decide you’re up for it, Tim Hale’s book Smarter Investing is probably all you need. I think it’s in the west country libraries.

The Little Book of Common Sense Investing is another. You'll get an old edition as a free pdf, and it's worth every penny and more.

‘If You Can’ is a free pdf by W Bernstein, short and sweet.

The Bogleheads' Guide to Investing, by Larimore et al is a 7.2MB pdf. I think it's here: https://ia803405.us.archive.org/23/items/the-bogleheads-guide-to-investing/The Bogleheads' Guide to Investing.pdf

Expected Returns An Investors' Guide to Market Returns by Ilmanen is not such an easy read, but a free 23MB pdf, after you’ve read the others.

The Basics of Investing Basics  A primer for the young retirement investor by A. Dad, is a free pdf written by a father for his daughters, not published as a book I think, but good enough at 40pp.

Investment Strategies for the 21st Century by Frank Armstrong is a 160pp pdf.

The Future of Life-Cycle Saving and Investing by Bodie et al is a 200pp pdf free from the Research Foundation of the CFA Institute. Sensible, but not a first read.

Serious Money, Straight talking about retirement investing, by Richard Ferri is a free 200pp pdf

Unveiling the retirement myth, by Jim Otar is 400pp free pdf written in the clearest well-structured way as an engineer would, but there's a lot of detail for when it comes time to decide how you can live of your investments based on a lot of financial history.

Bostonerimus1

Your FA is very expensive so get them to earn their money and ask them your questions.

Seriously at those level of fees your FA is a major drag on your returns.

I would sit down and do a budget to see how much retirement income you need, then take off your guaranteed income sources like DB pensions and see how much your investments need to generate. Then think about your asset allocation and how you might generate the required income, then drop the FA and yoi'll have an immediate 1.3% windfall.