Choosing an IFA

LHW99

I hadn’t considered GMP but as it’s never been mentioned I doubt I’m eligible for it.

Not an issue I know about, but my understanding is that it's not something you are exactly "eligible for", rather it is something that has to happen as part of contracting out?

"A GMP is a minimum pension that a workplace pension scheme normally provides.It only applies to people who were contracted out of the Additional State Pension from 6 April 1978 to 5 April 1997."

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/guaranteed-minimum-pension-gmp-and-the-effect-of-the-new-state-pension

If your SP forecast has mention of a COPE, then you would have been contracted out at some point.

Bostonerimus1

I'm a little worried by some of your investment actions ie moving into cash even at 5.4%, as you will hopefully have a long time to manage investments in retirement. You need to understand risk and return as they mesh with your income needs and cash isn't going to be a suitable long term solution. I think you need to do a budget and come up with income sources from things like DB pensions, SP, interest and dividends. You might look into annuities as a balance for equity investments, just understand your income streams and their potential variability.

kjs31

Bostonerimus1 said:

I'm a little worried by some of your investment actions ie moving into cash even at 5.4%, as you will hopefully have a long time to manage investments in retirement. You need to understand risk and return as they mesh with your income needs and cash isn't going to be a suitable long term solution. I think you need to do a budget and come up with income sources from things like DB pensions, SP, interest and dividends. You might look into annuities as a balance for equity investments, just understand your income streams and their potential variability.

I’ve only moved into cash temporarily. I will need to when I transfer my pension anyway as I doubt my new platform will offer the funds I’m currently invested in. My main SIPP isn’t in cash, it’s just my workplace pension and I felt very exposed there as most of my investments were in tech and the US. I wasn’t prepared to risk a crash at this point. I will move it somewhere else once I’ve moved platform. 

I’ve ruled out an annuity. The cost vs income provided didn’t seem to be that great TBH. A 7k DB pension (increasing every year) plus the state pension in a few years should provide me with enough regular, guaranteed income and I will drawdown the rest from my DC pension. I believe that I should be able to live comfortably if income from all sources takes me up to the top of the standard rate tax bracket. 25% of my drawdown will be tax free anyway as I’m not taking any TFC as as lump sum (unless labour move the goal posts). I’ve already done a fairly detailed budget and intend to try out that approach during my first proper retirement year in 25/26 to see how it goes. I can always drawdown a bit more if needs be, albeit that there will be more tax to pay. With income coming from a variety of sources I intended to wait until the end of the tax year to drawdown the lion’s share of my pension as at that point I should be able to to ascertain exactly how much income I have from other sources. I thought about drawing down say 1k per month and the rest in March. 

AlanP_2

Is there anything wrong with the funds your SIPP is already invested in?

kjs31

AlanP_2 said:

Is there anything wrong with the funds your SIPP is already invested in?

They haven’t performed particularly well vs the general market IMO over the last 6 years and they are withdrawing support shortly. 

“Please note that we are taking steps to withdraw support for the Levitas portfolios in due course, we will be contacting you again shortly with more information about this change and what it means for you.”

dunstonh

They haven’t performed particularly well vs the general market IMO over the last 6 years and they are withdrawing support shortly. 

Are you comparing like for like?
its very common for people to not realise that the investment they have is a different risk level to the ones they are looking at.   They blame the pension but in reality, its the investments and if the existing scheme has alternative investments to select from, then often you just change the investments and not the pension.

In the last 7 years, anything with a US equity bias has done better than those without a US equity bias.    However, that is the complete opposite to the cycle before where US equity was one of the worst performers.     These things tend to cycle.   So, make sure you are not relying on short term data when comparing.

“Please note that we are taking steps to withdraw support for the Levitas portfolios in due course, we will be contacting you again shortly with more information about this change and what it means for you.”

 A quick look indicates they are outperforming the markets linked to their underlying assets.  They are multi-asset funds (unfettered fund of funds) that use underlying passives (Fidelity, Vanguard etc).   So, they would underperform the general market in growth periods as they are lower risk (general market being stockmarket).   

Which one are you in and what you are comparing it to as an alternative?

xylophone

I can take my 7k DB pension from my first ever job at the end of this year 

I hadn’t considered GMP but as it’s never been mentioned I doubt I’m eligible for it. 

It is virtually certain that your scheme was "contracted out" of Additional State Pension between 1978 and 2016.

If so and if you were a member of the Scheme between 1978 and 1997, then you will have a GMP.

kjs31

xylophone said:

It is virtually certain that your scheme was "contracted out" of Additional State Pension between 1978 and 2016.

If so and if you were a member of the Scheme between 1978 and 1997, then you will have a GMP.

I was definitely contracted out in 2 pension schemes. Both were DB schemes although I transferred out of the second one so only have the older one now. When the new state pension came in I ‘lost’ 5 qualifying due to contracting out. Once I hit 40 qualifying years at the end of the last tax year (as opposed to 35 years) I qualified for a full state pension (under current rules). 

I’ve never seen GMP mentioned for my old pension but it almost certainly is (Civil Service Classic scheme). 

kjs31

dunstonh said:

They haven’t performed particularly well vs the general market IMO over the last 6 years and they are withdrawing support shortly. 

Are you comparing like for like?
its very common for people to not realise that the investment they have is a different risk level to the ones they are looking at.   They blame the pension but in reality, its the investments and if the existing scheme has alternative investments to select from, then often you just change the investments and not the pension.

In the last 7 years, anything with a US equity bias has done better than those without a US equity bias.    However, that is the complete opposite to the cycle before where US equity was one of the worst performers.     These things tend to cycle.   So, make sure you are not relying on short term data when comparing.

“Please note that we are taking steps to withdraw support for the Levitas portfolios in due course, we will be contacting you again shortly with more information about this change and what it means for you.”

 A quick look indicates they are outperforming the markets linked to their underlying assets.  They are multi-asset funds (unfettered fund of funds) that use underlying passives (Fidelity, Vanguard etc).   So, they would underperform the general market in growth periods as they are lower risk (general market being stockmarket).   

Which one are you in and what you are comparing it to as an alternative?

I know that they are performing as well as the benchmark. I’m just not sure why I’m in those particular funds. I came out as medium risk I believe and I have 70% invested in Scottish Widows Levitas B and 30% in Levitas A. It’s that % due in part to my proximity to retirement I believe. If I had managed a flat return of 5% over the first 5 years I would be up on my investment now. I know that cash hasn’t returned 5% in previous years so it’s just a rough indication. But if a supposed lower risk option can’t return 5% PA over 5 years then I don’t see the benefit over cash. Maybe I’m missing something? 

 

Valuation         5% return 20/08/2018     756752 20/08/2019     805539         794589 20/08/2020     820187         834319 20/08/2021     926815         876035 20/08/2022     884012         919836 20/08/2023     838887         965828 12/08/2024     939571        1009091

dunstonh

I know that they are performing as well as the benchmark. I’m just not sure why I’m in those particular funds. I came out as medium risk I believe and I have 70% invested in Scottish Widows Levitas B and 30% in Levitas A. It’s that % due in part to my proximity to retirement I believe. If I had managed a flat return of 5% over the first 5 years I would be up on my investment now. I know that cash hasn’t returned 5% in previous years so it’s just a rough indication. But if a supposed lower risk option can’t return 5% PA over 5 years then I don’t see the benefit over cash. Maybe I’m missing something? 

Bonds went through their worst period in over 100 years between Nov 2021 and October 2023.  That period will bring down any averaging you use.    However, bonds tend to do better when interest rates and inflation are heading down or staying low.

However, for over a decade before Nov 2021, bonds performed significantly better than their long term average.   Most of the 21-23 period was the unwinding of that excess.

You need to understand how the investments you have work before selecting alternatives.   Especially if you are looking at past performance.  Often the areas that go up more in one period are the ones that went down more in the previous and vice versa.  So, chasing best performance could see you suffer worst performance.