Pension and investing.

iwblue

I've got a PP with 90k in and ive approx 60k in cash to invest. I have spoken with an IFA about how to manage these as I want to generate about 500pm, to add to a work pension thats already paying out. I've got 5 years until I get my state pension. I got the distinct impression he was reluctant (somewhat) to take me on. So I'm a bit confused as to what to do. They did eventually say they would advise. Fees are 3% (initial £4800) and ongoing 1%. I've used this person before about 8/9 years ago. Happy to pay for advice, fees seem high, or is it just me?

Albermarle

Just for info there is a specific pensions forum -

Pensions, annuities & retirement planning — MoneySavingExpert Forum

Many IFA's are very busy, so can be a bit picky about new work, which can mean they make the quote expensive.

Ongoing 1 % is normal for a £150K pot. However £5K initial is a big chunk for what seems a relatively straightforward situation.

Have you thought about sorting it out yourself, lots of people on these forums doing that, although of course it is not everybody's cup of tea.

iwblue

I have thought about it. Im just not confident in this type of investing. Maybe I just need to take the plunge and dive into these forums and read up on everything. Thx for the response

dunstonh

 I got the distinct impression he was reluctant (somewhat) to take me on.

Some IFAs have quite high assets under management requirements. There's a firm near us that's a 250k minimum. I know another one about 30 miles away, that's one million.

Most should be fine with 150k, though. It's at the lower end, but it's not at the "don't want to do it" end.

They did eventually say they would advise. Fees are 3% (initial £4800) and ongoing 1%. I've used this person before about 8/9 years ago. Happy to pay for advice, fees seem high, or is it just me?

The 1% ongoing is typical for a fund of that size. You do expect tiering to occur on caps, but they tend to be from higher values than what you've got. 3% seems a bit high, but 2% on that figure would be more reasonable.

eskbanker

https://forums.moneysavingexpert.com/discussion/6667251/pension-and-investing

Do you mean that of that £90K, £60K is still uninvested, i.e. total pot is £90K, or that they're two separate pots totalling £150K?

Either way round, how did you decide what to invest the pension money in previously, i.e. did you engage an IFA or did you DIY?

kempiejon

https://forums.moneysavingexpert.com/discussion/comment/81990074#Comment_81990074

I've got a PP with 90k in and ive approx 60k in cash to invest. … I want to generate about 500pm, …

Fees are 3% (initial £4800) and ongoing 1%. …I've got 5 years until I get my state pension.

Do you have £90k in a pension and £60k cash outside and want £500 per month so £6k a year? The fee will eat much of the first year income you want. I think that makes taking the plunge pretty compelling.

If £150k then £6000 annually will last 25 years. If only £90k you're still good for 15 years. £90k in a pension for a 60 something could annuitize at about £6k a year for life.

DRS1

What exactly are you looking for? You have say £150k and want £500 pm income from that £150k? So at the end of the 5 years you still want to have £150k? Something like the NS&I 5 year Guaranteed Income Bond would give you 4.32% interest paid monthly.

Of course if PP means pension plan then you can't put that in a GIB and instead you need to think about how you draw money from that plan. Many people who are drawing a bit of their DC pension will put an amount in cash or cash equivalents to cover the 5 years and then invest the rest. If you are making pension contributions you need to consider what impact drawing from your pension in a particular way may have on those contributions (ie do you need to take only tax free lump sums).

Or are you just looking to spend £500 a month and don't mind if you only have say £120k left at the end of the 5 years? You could just spend half the cash and not worry about the pension …. but

You'd need to think about your tax position - are you using up your personal allowance each year? Do you actually want to be drawing some taxable pension to use up any personal allowance you aren't using? Maybe you aren't making any pension contributions now so taking taxable pension wouldn't be an issue?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81990209#Comment_81990209

If £150k then £6000 annually will last 25 years. If only £90k you're still good for 15 years. £90k in a pension for a 60 something could annuitize at about £6k a year for life.

I think in both examples you are talking about payments that are not inflation linked, so over a long period their real value will shrink significantly.

Anyway if £150K is invested ( lets say in a standard 60/40 way) you should be able to withdraw around £5K pa increasing with inflation each year, and it will be very unlikely to ever run out, and you may well die with more than £150K . Even with £6K increasing with inflation, you would probably still be fine.

Bostonerimus1

Assuming you have 150k then a return of 4% would generate your 6k/year without having to touch principal. The headwind of 1% IFA fees would make that a lot harder. Right now you could generate your 4% with a saving account or money market fund and you might get a lot more from a global equity index fund…but of course you might also lose money with the index fund. You could also look into funds that emphasize dividends to produce a fairly reliable income.

kempiejon

I think in both examples you are talking about payments that are not inflation linked, so over a long period their real value will shrink significantly.

@albermarle Absolutely. OP was looking at a 5 year period and as mentioned a 4% return would leave the principal intact

iwblue

THank you for the responses. I used this advisor for the pension element, which is currently valued at 90k. Its on the Scottish widows platform invested in legal and general multi index 5 fund. I have approx a further 60k currently in cash isa's that i could invest as I don't need immediate access to it all, as i have an emergency cash fund set aside. I was looking at Investing this rather than sitting in cash. I will retire in a couple of months so will need approx 500pm to cover outgoings. Im not necessarily looking at increasing capital over the 5 years, keeping up with inflation,whatever that turns out to be, and id be looking at drawing the 500 from whichever is most tax efficient choice. Ideally id like the money in one place for practical reasons so I can see where I'm at whilst drawing an income.