Do I need an IFA? If so why? What is the alternative?

Pat38493

slaney said:

All useful advice.  

I'm an IT contractor who provides services through an umbrella company and is inside the IR35 legislation. I make several hundred daily but am not paid for sick or holidays.  So, I am neither a limited company nor a sole trader.  I am an employee of the umbrella company.  I make more than £150k gross a year paid in dribs and drabs depending on how much I have worked that week.  

I currently pay about 52% tax on my earnings - including paying employers' NI and employees' NI - and want to change that situation to offset tax into my pension.  

Peers keep telling me I need a SIPP and to put as much as possible into a pension pot. 

  

I have bits of pensions everywhere going back to the 1980s when I started working at 16. I don't know how much they are worth.  I need to get a sense of where I am at.  I have put something into a pension for years but change jobs often. I can't remember all of the jobs I have done over the years, to be honest. I used to work in all sorts of jobs, from factory work to estate agent.  

The idea of my pension being like a bank account is that I want to see it all in one place and see the interest I am getting each year.  I would like to see exactly where I am at.  I would like to earn a bit of interest on the money in the pension but I would not want it to get less. 

I am 54.  I have no plans to retire and want to carry on working until at least 70 (I love working, and I love what I do).  I will stop working when I can't do what I do because I am dead or ill.  But sometimes, when I am older, I will work for half the year and then travel for the other half of the year or be a digital nomad.  Hopefully, I won't have to rely on savings until I am at least 75. 

I didn't ask for investment advice or someone to invest a portfolio.  I just asked on that unbiased website for someone to help me find all of my pensions and combine them so I can see where I am at because I am a pretty busy person, and I would like to handle the problem of filling out the paperwork for all of the pension stuff to someone else.  Then, I want the umbrella company to pay into that pension.  

Still not sure if I want to pay £3k for someone to combine pensions. 

I think you might find that it's difficult to outsource the problem of locating all your missing pensions.  You can pay someone a lot of money to consolidate your pensions, but they will need a lot of information about which companies you worked for in the past and when, and there is only one person they will come back to for that - you.  They will then ask you to dig out all and any relevant paperwork or correspondence, which will be half the job done anyway.

My fear would be that you will pay someone a lot of money but in the end the legwork will mostly have been done by you anyway.

I believe the government is supposedly working on some kind of central tracking tool for lost pensions, but I think they've been promising it for years and there is no sign of it yet - this means that in the end you have to know who you worked for and try to trace whoever was the pension provider for that firm at that particular point in time.

Secondly - having the pension like a bank account in terms of having it all consolidated into one place with online access and reporting is certainly achievable and a good idea, assuming you can find the pensions in the first place to transfer in there.  However, what you should be careful of is having the expectation that your balance will or should go up continuously.  If you are investing for the long term (and 16 years is pretty much long term), you will need to invest the pension at least partly into equities to get good growth over that long term.  This also requires the acceptance that there will be a few years where it shrink, but other years it may grow by 20% or more, so in that sense it should not be seen as like a bank savings account.

Also it does not have to be invested in individual shares - you can invest the whole pension in a multi asset mixed fund like for example a Vanguard Lifestyle fund, and this will already most likely do pretty well over 16 years.  

xylophone

Well, you have a choice.

You can pay for your IFA (?) to do the legwork or you can set aside the hours required to do it yourself.

However, you should remember that before your adviser can do the work, he will need details of your employers from you together with any paperwork that you have.

If you have this information, you might as well try the Pension Tracing Service yourself?

Here is another service you might try

https://www.gretel.co.uk/find-lost-pensions

Another avenue of research

https://www.tax.service.gov.uk/shortforms/form/DPU_SAR_NI?_ga=2.230026460.1544670040.1621021753-1315656139.1609178084

See Marcon's result here

https://forums.moneysavingexpert.com/discussion/comment/78377177/#Comment_78377177

You have said that you have a company pension with Aviva.

Why not start contributing  to your pension and reduce your substantial tax bill?

See

https://www.ii.co.uk/pensions/tax/high-rate-tax-relief

And is a COPE shown on your State Pension Forecast (second page)?

slaney

Contracted Out Pension Equivalent (COPE)

Your COPE estimate is £0.04 a week

xylophone

Your COPE estimate is £0.04 a week

Well apart from nil, that's the lowest I've come across.......

phonek

Firstly, that 203.85 is the current maximum weekly State Pension amount (provided you finish your minimum contributions years – likely 35 years, but could be a few more or less, as per your Summary stated when you  presumably checked it). It grows roughly with inflation each year, though taxation may apply to reduce it, depending on your other private pension(s) and/or other income streams in retirement. 
-------------------------------- 
A basic plan: 

1. Start by writing a list of previous jobs. 
Think as best you can if they came with pension provisions at all to help you move forward when taking future  professional advice. 

2. Contact "Money and Pensions Service" (prev. The Pensions Advisory Service). Link from info here: 
https://www.gov.uk/government/organisations/single-financial-guidance-body 

They're basic professionals who can help advise you a way forward. 

Two basic other things to note about pensions: 

A. Sometimes keeping pensions separate may be better than combining them. 
It may be beneficial to combine some, while not others. But take advice before making any decisions. 

B. Most pension funds are invested in the stock markets as it has the most reliable long-term performance. 
This includes basic supermarket employees, all the way up up to top CEO's. Of course there are other things, but the core investment strategy is that people's funds are in the markets, invested via pension fund managers who do the job for most folks who clearly have no idea on investing in such things themselves.

Typically, you get regular statements from each pension advising its current funds value for your pot invested with them, from which you can then use to plan your retirement, including taking into account things such as inflationary drag reducing your spending power over time, and so you can make some decent rough estimates on needs vs. wants over those potential decades of retirement. Remember you likely won't work forever, as age sets in, so think laterally about things. 

QrizB

slaney said:

I make more than £150k gross a year paid in dribs and drabs depending on how much I have worked that week ... I currently pay about 52% tax on my earnings

Those two statements together make me wonder if employing an IFA would save you more in tax and NI than their fees.

slaney said:

Still not sure if I want to pay £3k for someone to combine pensions. 

But you're not paying £3k to combine your pensions. You're paying them to:

slaney said:

I contacted an IFA, and they want over £3k to combine all my pensions and advise on what to invest in.  Then, they charge an ongoing fee to manage the portfolio.

Just offhand, and depending on exactly where your £150k pa goes and how serious you are about building your pension, I think you could probably save £25-£30k on your tax and NI bill by taking proper financial advice. And I'm just a random bloke on the internet, not an IFA.

And yes, you could do this yourself, but how much do you value your free time? Is it worth the fee to have someone else do it for you? I could service my own car (and until a few years ago I did), but now I'd rather pay someone else £100-ish to have that day to myself.

Marcon

slaney said:

I have bits of pensions everywhere going back to the 1980s when I started working at 16. I don't know how much they are worth.  I need to get a sense of where I am at.  I have put something into a pension for years but change jobs often. I can't remember all of the jobs I have done over the years, to be honest. I used to work in all sorts of jobs, from factory work to estate agent.  

The idea of my pension being like a bank account is that I want to see it all in one place and see the interest I am getting each year.  I would like to see exactly where I am at.  I would like to earn a bit of interest on the money in the pension but I would not want it to get less. 

I am 54.  I have no plans to retire and want to carry on working until at least 70 (I love working, and I love what I do).  I will stop working when I can't do what I do because I am dead or ill.  But sometimes, when I am older, I will work for half the year and then travel for the other half of the year or be a digital nomad.  Hopefully, I won't have to rely on savings until I am at least 75. 

I didn't ask for investment advice or someone to invest a portfolio.  I just asked on that unbiased website for someone to help me find all of my pensions and combine them so I can see where I am at because I am a pretty busy person, and I would like to handle the problem of filling out the paperwork for all of the pension stuff to someone else.  Then, I want the umbrella company to pay into that pension.  

Highly unlikely that all the jobs you had offered a pension scheme - and even if they did, you might not have been there long enough to qualify for a 'deferred' pension, but simply had a refund of your own contributions when you left.

Pensions don't work like bank deposit accounts, so you are looking for something which doesn't exist within a pension scheme. You pick the investments with advice, or for yourself, as you see fit - whether you need an IFA is your choice, but given your limited knowledge, it could be one of your better investments. Beware trying to maintain capital value as the priority when you are still relatively young. Risk comes in more than one form...

Unlikely the umbrella company will agree to pay contributions elsewhere, but worth asking them. If they won't, there's nothing to stop you setting up your own SIPP and paying into that/opting out of the umbrella arrangement - you're the one funding it, so you don't lose 'employer contributions'.

slaney

I appreciate everyone jumping in.  I think the value of the IFA might be in saving me tax and pension fees.  I will do some work and research over the weekend. 

dunstonh

slaney said:

I appreciate everyone jumping in.  I think the value of the IFA might be in saving me tax and pension fees.  I will do some work and research over the weekend. 

From your comments, I think the most valuable benefit an IFA would give you is protecting you from bad decisions based on a lack of knowledge.    That is not meant negatively.   If something is not within your knowledge and understanding then going DIY can be very costly and some of the things you have said suggest you are at risk of that.

Pipthecat

The idea of my pension being like a bank account is that I want to see it all in one place and see the interest I am getting each year.  I would like to see exactly where I am at.  I would like to earn a bit of interest on the money in the pension but I would not want it to get less. 

As others have said, locate your old pensions yourself.  Hopefully you have some DB pensions which you will keep.  Any DC pensions you have like Nest you can consider transferring into a single SIPP such as offered by Vanguard, HL, Interactive Investor etc. so you can log in and watch your investments grow (and fall).  This forum will be helpful here selecting platforms and the process of transferring which is often surprisingly easy.

As a start, if you have not already done so, open a SIPP today and start paying in to get the immediate 20% tax relief.  Add these contributions to your self assessment and HMRC will write you a cheque for the remainder of the tax relief.