Vanguard 2030 Vs IFA?

DT2001

Ibrahim5 said:

wjr4 said:

Ibrahim5 said:

Sounds like a good reason to make sure that an IFA never gets near your investments.

Have you noticed that everyone ignores you now? 

They don't. If an IFA invests in a fund that you can't transfer out to another platform, it's just another indication that IFAs only do things that's beneficial to them, not the customer. They are locking you in with an exit fee, just like SJP. You can leave the IFA but you will lose out because the IFA has designed it that way. Nice.

I don’t think it is the IFA designing ‘it’ it is how the platforms are run? 

hodd

DT2001 said:

hodd said:

DT2001 said:

If you are planning to retire to Asia what are the tax implications. Maybe you need to talk to your accountant first especially if you will continue to work part time when overseas/non resident? Are you better leaving funds in the company or putting into your pension?

I’m a contractor and have no employees. It suits me to work through a limited company as the taxes/NI are lower than the alternative. Isn’t one of the few advantages left of a limited company the fact it can be used to pay into a pension and save on corporation tax?

I don’t usually keep much in my limited company bank account. I pay myself a low salary and withdraw the expenses that I can. It’s costly in accounting fees to have a limited company, and I’ll be happy to close it when I retire. 

But it sounds like you’re suggesting keeping money in the business as an alternative to putting it into a pension. Surely the money won’t grow in a business account? Could you expand on this, please?

I have a friend who has quite a large reserve as he takes up to the higher tax threshold but you’ve just explained that you hold little in the account. Will you continue to run the company when in Asia?
I was suggesting asking your accountant what happens when you move to Asia - just run your plans past him/her as they may have some suggestions.
My OH has an accountant and I make sure he knows what we are planning so he considers our overall situation when giving tax advice.

I don’t have the greatest discipline when it comes to limited company behaviour. A look at my thread history shows I once found myself unable to pay corporation tax! My current accountant holds my hand, and I can see exactly how much in the account is mine and how much to leave for the taxman. Such babysitting isn’t cheap, so I’ll be glad to not have a limited company in the future. In fact, due to IR35 rules, I ended up doing a couple of years as an umbrella contractor and, despite paying mahoosive NI, probably wasn’t that much worse off. 

But my accountants do offer pension advice, and I should speak with them. 

As of this morning, I spoke to another FA (yes, an FA) about my pension. He did make a good point albeit obvious. He suggested my Vanguard 2030 would probably be withdrawn via an annuity (that’s my poor storytelling, not the FA’s exact words), and an annuity would be affected by market downturns if these occurred at that time. It’s fairly obvious, but something I’ve not protected myself against, even with the 2030 lifestyle pension. Now how that’s achieved in theory I need to some reading about.

dunstonh

But my accountants do offer pension advice, and I should speak with them. 

Accountants (individuals) do not offer advice.    Accountants (firms) can offer advice by using in-house IFAs or, in some cases, in-house FAs.    

As of this morning, I spoke to another FA (yes, an FA) about my pension. He did make a good point albeit obvious. He suggested my Vanguard 2030 would probably be withdrawn via an annuity (that’s my poor storytelling, not the FA’s exact words), and an annuity would be affected by market downturns if these occurred at that time. It’s fairly obvious, but something I’ve not protected myself against, even with the 2030 lifestyle pension. Now how that’s achieved in theory I need to some reading about.

It isn't obvious you would select an annuity.    That is a choice.    Also, it may not be the sole choice.  A combination of methods is common.

Annuities are not affected by stockmarket downturns.  They are affected by interest rates, inflation and sentiment towards gilts.     The fund leading up to the purchase of the annuity will be subject to the returns of the underlying assets.

 Now how that’s achieved in theory I need to some reading about.

You buy gilts.

zagfles

hodd said:

DT2001 said:

hodd said:

DT2001 said:

If you are planning to retire to Asia what are the tax implications. Maybe you need to talk to your accountant first especially if you will continue to work part time when overseas/non resident? Are you better leaving funds in the company or putting into your pension?

I’m a contractor and have no employees. It suits me to work through a limited company as the taxes/NI are lower than the alternative. Isn’t one of the few advantages left of a limited company the fact it can be used to pay into a pension and save on corporation tax?

I don’t usually keep much in my limited company bank account. I pay myself a low salary and withdraw the expenses that I can. It’s costly in accounting fees to have a limited company, and I’ll be happy to close it when I retire. 

But it sounds like you’re suggesting keeping money in the business as an alternative to putting it into a pension. Surely the money won’t grow in a business account? Could you expand on this, please?

I have a friend who has quite a large reserve as he takes up to the higher tax threshold but you’ve just explained that you hold little in the account. Will you continue to run the company when in Asia?
I was suggesting asking your accountant what happens when you move to Asia - just run your plans past him/her as they may have some suggestions.
My OH has an accountant and I make sure he knows what we are planning so he considers our overall situation when giving tax advice.

As of this morning, I spoke to another FA (yes, an FA) about my pension. He did make a good point albeit obvious. He suggested my Vanguard 2030 would probably be withdrawn via an annuity (that’s my poor storytelling, not the FA’s exact words), and an annuity would be affected by market downturns if these occurred at that time. It’s fairly obvious, but something I’ve not protected myself against, even with the 2030 lifestyle pension. Now how that’s achieved in theory I need to some reading about.

I'm not sure what he means by that. Annuities are affected mainly by the price/yields of gilts, hence why annuities have become much better value than a few years ago. And not sure why he thinks it would "probably" be withdrawn via an annuity rather than drawdown. 

TR or "lifestyle" funds usually target a retirement date and a retirement income method, ISTR when looking at the VLS TR funds they seemed to be somewhere in between annuity and drawdown, a bit aggressive for annuities and a bit defensive for drawdown. There are annuity protection funds you can get if you want a more defensive position, basically invests mainly in mid term gilts. Or if you want to get more advanced, buy gilts of the appropriate duration yourself, or move into them as you approach retirement. 

dunstonh

They are locking you in with an exit fee, just like SJP. 

No exit fees.   Made up by him as usual.

You can leave the IFA but you will lose out because the IFA has designed it that way. Nice.

The investor gets the DIY version which is exactly what they would have got had they not used the IFA in the first place.  

And they really buy that   If they want VLS65 they could just buy a combination of VLS 60 and VLS 80. Or they could just buy the underlying funds and rebalance themselves every 18 months. Or leave it 2 or 3 years, that'll get even better performance, right  

No. Because VLS doesn't use 10% drift.   It rebalances quarterly.  Nice try though.

zagfles

Albermarle said:

I must admit, having now looked at example IFA fees online, they’d be a substantial part of my pot. I saw an example of £5k a year for my £300k pot. That’s less than 2%, but it seems a lot to me.

Just to be clear, this ongoing charge of £5K probably includes 3 or 4 items. eg, platform cost, investment fund costs, advisor costs etc . Although there would be an initial charge as well, which could also be around £5K. 

When you DIY there are also ongoing charges ( but no initial charge)  There will at least be a platform cost and an investment fund cost. For £300K if you very focused on charges, you could get this down below £1K, but more typically it would be say £1.5K . If you were on the most well known investment platform and invested in one of their managed funds, you would be paying more than £5K.

Who can you be talking about? On HL for instance 0.75% total on their new managed funds so £2250 on a £300k investment: HL Multi-Index Funds | Hargreaves Lansdown 

Of course you can get cheaper than that using ETFs etc or a cheaper platform. 

zagfles

dunstonh said:

And they really buy that   If they want VLS65 they could just buy a combination of VLS 60 and VLS 80. Or they could just buy the underlying funds and rebalance themselves every 18 months. Or leave it 2 or 3 years, that'll get even better performance, right  

No. Because VLS doesn't use 10% drift.   It rebalances quarterly.  Nice try though.

Non sequitur. I said they could buy the underlying funds and manually rebalance, ie not using VLS. Because delaying rebalancing increases performance, right? And risk too, but we won't dwell on that. 

hodd

You buy gilts

Hello Dunstonh, thanks. 

As you probably know, Vanguard 2030 (currently 60% equity, 40% bonds) gradually increases the proportion of bonds to equity to around 60:40 in 2030. 

I’m going to take advice on this as it’s one of my main concerns (understandably in these times) that equities tank just when I’m planning to retire. If there was a Covid 2 tomorrow (let’s hope not) and markets were affected, I don’t know if the current distribution would be changed by Vanguard. I’d assume so.

But I think your message is to seek advice and not just “hope for the best” with my Vanguard 2030?

dunstonh

As you probably know, Vanguard 2030 (currently 60% equity, 40% bonds) gradually increases the proportion of bonds to equity to around 60:40 in 2030. 

But it doesn't specifically buy gilts.  It goes into a range of bonds.

 If there was a Covid 2 tomorrow (let’s hope not) and markets were affected, I don’t know if the current distribution would be changed by Vanguard. I’d assume so.

Vanguard's methodology is static and not affected by short-term events. The HSBC GS range has a bit more management in it as it is volatility-targeted.

But I think your message is to seek advice and not just “hope for the best” with my Vanguard 2030?

No. I always say it's a choice between DIY and IFA. Like any form of DIY, if you do it well, you can save money. If you do it badly, then it can be a costly mistake. So, be honest with your ability and decide for yourself.

Statistically, growth periods outnumber negative periods.  So, any reduction in equities will most likely result in a lower fund value in most periods.    You do not reduce equities to make the most money.  You do so to protect what you have.    And if annuity purchase is the intention, then gilts are the way to protect what you have.     Gilts fell from late 2021 to Oct 2023.   However, because of that, annuities went up by a corresponding amount.   So, whilst many people in lifestyle funds saw their fund values drop heavily, it didn't cost them anything if they bought an annuity.

Depending on your risk profile and capacity for loss, you may not go gilts. You may decide to take some risks and use money markets for a period, other types of bonds, or lesser-risk equities. You can do so many different things, and only time will tell which is best. Whatever you do, in the future, if you look back with hindsight, you will see it was not the optimal way, and something was better.   So, you have to make judgement/conviction calls that are reasonable and suitable even though they may not and probably will not give the best return in many periods.

Albermarle

zagfles said:

Albermarle said:

I must admit, having now looked at example IFA fees online, they’d be a substantial part of my pot. I saw an example of £5k a year for my £300k pot. That’s less than 2%, but it seems a lot to me.

Just to be clear, this ongoing charge of £5K probably includes 3 or 4 items. eg, platform cost, investment fund costs, advisor costs etc . Although there would be an initial charge as well, which could also be around £5K. 

When you DIY there are also ongoing charges ( but no initial charge)  There will at least be a platform cost and an investment fund cost. For £300K if you very focused on charges, you could get this down below £1K, but more typically it would be say £1.5K . If you were on the most well known investment platform and invested in one of their managed funds, you would be paying more than £5K.

Who can you be talking about? On HL for instance 0.75% total on their new managed funds so £2250 on a £300k investment: HL Multi-Index Funds | Hargreaves Lansdown 

Of course you can get cheaper than that using ETFs etc or a cheaper platform. 

HL actively managed funds, which they also promote cost 1.4% in total, so approx £4000 ( not £5000 as I wrongly said) . I was not aware of the  new ones which seem to be just typical multi asset funds, just in house ones.