Financial advisor or DIY?

MX5huggy

No you can’t carry over unused pension tax relief (or unused ISA allowance). You may read about pension carry over but that is only relevant if you earn over £60k per year. 

If you put £1000 of taxed income in a SIPP yes they add 25% so you end up with £1250 in the SIPP. 

With SS if you sacrifice £1250 your take home pay after tax is only reduced by £900 (28% tax and NI on £1250 is £350) so you get £1250 in your pension and £100 in your pocket. 

Well done on the student loan it’s not an issue now. 

egyptiancotton

MX5huggy said:

No you can’t carry over unused pension tax relief (or unused ISA allowance). You may read about pension carry over but that is only relevant if you earn over £60k per year. 

If you put £1000 of taxed income in a SIPP yes they add 25% so you end up with £1250 in the SIPP. 

With SS if you sacrifice £1250 your take home pay after tax is only reduced by £900 (28% tax and NI on £1250 is £350) so you get £1250 in your pension and £100 in your pocket. 

Well done on the student loan it’s not an issue now. 

Thank you for the compliment on the student loan. Before I started studying and during my studying, I was conscious to keep my student loans as low as possible. I'm now glad that I did.

Some interesting advice there about the different pension contribution approaches. I'll get some sleep and mull this over in the morning. Have a good night!

JohnWinder

You could be investing for 40 years. With a miracle your investments would return 5.65%/year every year and never experience low performance, or after paying an advisor return 5%/year. By age 75 you would have foregone 22% of the gains through the advisor fee.

'My concern is that ongoing charges will eat into capital value during periods of low performance.'

You think fees during periods of low performance are a particular problem. No, they're always a problem. Get familiar with an online compound interest calculator.

Use an advisor by all means, but read Tim Hale's book Smarter Investing which will help you decide if you need an advisor as well as give you a more satisfying relationship with an advisor if you keep one.

Bostonerimus1

JohnWinder said:

You could be investing for 40 years. With a miracle your investments would return 5.65%/year every year and never experience low performance, or after paying an advisor return 5%/year. By age 75 you would have foregone 22% of the gains through the advisor fee.

'My concern is that ongoing charges will eat into capital value during periods of low performance.'

You think fees during periods of low performance are a particular problem. No, they're always a problem. Get familiar with an online compound interest calculator.

Use an advisor by all means, but read Tim Hale's book Smarter Investing which will help you decide if you need an advisor as well as give you a more satisfying relationship with an advisor if you keep one.

Advisor fees can certainly compound over the years reducing the size of the final pot...of course that assumes that the DIYer is sensible and does not commit any investing sins...and of course many advisors are also perfectly capable of financial sins, but hopefully not the sin of panic.

So fees can be bad when you are working, but they are also bad when you retire because if you are paying 1% total in fees that will be a quarter of a 4% drawdown and probably your largest expense in the early years of retirement.

RolandFlagg

FA's have one objective:
To make themselves richer.

They give terrible outdated advice.

See the latest Ben Felix YouTube video on the latest data.

Angelica123

egyptiancotton said:

MX5huggy said:

Open a Cash ISA tonight probably with a bank you are already a customer of so you can move £20k now this takes the pressure off and lets you think. 

Don’t worry about the additional pension contributions this tax year. You can put £51k in next year if you wish. 

Salary Sacrifice pension contributions are best because you save the NI on top of the income tax savings. As the vast majority of your income is taxed at 20% the NI saving is an additional 8%. You also don’t pay student loan payments on the sacrificed salary (do you have a student loan?).

up your salary sacrifice so you are left with National Minimum wage (you can’t sacrifice below this) £11.44 per hour is just under £24000 per year. 

You can put the rest of your income in a SIPP if you wish. 

Thank you for replying. I really appreciate it.

Do you know if tax relief only applies to earnings in the current tax year? Can I carry unused annual allowances from previous tax years and get tax relief on that?

I hadn't thought of increasing my salary sacrifice pension contributions. I assumed that paying a lump sum into a SIPP would be better because of the tax relief - 20% top-up sounded good.

Good point about the student loan which I forgot to mention - I don't have a student loan. I paid that off a few years ago. I paid via monthly payments through salary. I didn't pay it off in one go or anything. I've updated my original post to include that I don't have a student loan.

I felt a bit of pressure speaking to the IFA yesterday and today. I mentioned to him that I could set up an ISA and make a lump sum contribution of £20k this tax year so that I don't lose the allowance and, worst case scenario, transfer the ISA to another provider in the next tax year- he didn't really comment on this approach. As for the pension tax relief, he advised that losing the tax relief on the lump sum pension contribution this tax year would be a shame - this is where I felt the pressure to get a move on with making a lump sum contribution this tax year to get the tax relief.

There's always going to be a feeling of pressure when making decisions so close to the end of the tax year. I think it is better to accept that maybe you won't maximise the benefits of this tax year - rather than rush into decisions based on time pressure. Put 20k in whatever cash ISA you can open and fund before the end of the tax year (even if the rates are uncompetitive). You can always transfer it later to a S&S ISA but at least you have gotten that lump sum in before the end of the tax year so you don't lose this year's tax allowance. The rest you can decide at your leisure. 

Your priority is definitely maximising your pension contributions especially if you are looking to retire early as you will have fewer years of contributions. 

dunstonh

I've looked through the factsheets for the ISA, and can't see any mention of OEIC or MPS. I'm sorry I can't be more helpful.

Since Vangaurd launched the MPS versions, the MPS version has grown just under 2% higher on VLS80 (14.22% for the MPS version or 12.29% for the OEIC version). The VLS80 global version is 17.10%, so nearly 5% better.

The MPS version cannot be used with transactional clients due to the contract that Vanguard offers (which is the same as most).   So, if the adviser is getting wind that you are considering transactional advice then they would use the OEIC version.

dunstonh

FA's have one objective:
To make themselves richer.

They give terrible outdated advice.

See the latest Ben Felix YouTube video on the latest data.

Yet that is not supported in the complaints data or the FCA reviews.   Ben Felix doesn't say that either.

 Why would anyone in the UK want to watch a video from a Canadian saying Bank financial advice is worse than people realise?    That video is giving terribly outdated advice as banks stopped offering advice following the RDR in 2013.

He has videos promoting the 4% SWR, which again wrong for the UK and has a video on reasons to avoid index trackers.   And talks about life insurance as a tax free investment.  However, its not tax free but taxed internally and returns lower as a result (the tax gets taken out of the fund).  Of course, that is the UK taxation of life insurance but that is all that matters to UK investors.   They don't care what it may be in Canada.

The OP has asked for help.  You are just muddying the waters and making it harder for them.

LHW99

Putting more into your work pension will not hurt, nor will opening a cash ISA.

If you feel you are too inexperienced just now, then use an IFA initially (make sure of the independet "I"), while you learn. It is always possible to transfer a DC pension to a DIY provider later if/when you feel you are confident in your knowledge.

enthusiasticsaver

I would not rush to make a decision based on time pressure.  You can always invest in your pension next year but it is probably worth putting £20k in a cash ISA wrapper if you have not used this years allowance. 

Are you maximising your current employers pension scheme?