Pension

nrsql

>> Not a lot more risk in there than for the S&S ISA approach.
Think we'll just have to disagree there - unless you know some way of moving funds out of a pension like you can an ISA if they become disadvantageous.

nrsql

dunstonh wrote: »

Scottish Widows and Transact can for larger portfolios as they factory gate charge the funds but have fund based discounts. (i.e. they remove the trail part from the amc but add in a fixed percentage which goes down as the fund value goes up). This makes them cheaper for larger portfolios.

Selestia(Skandia) allows selection of explict trail. So, on execution only cases the IFA can take 0.25% of the trail.

Then you have the smaller fund ranges on personal pensions and some of these can be cheaper than HL. Clerical Medical, AXA, Scottish Life, NU (although not sure if that contract is available nationally yet) to name a few.

So to take two popular funds
INVESCO PERPETUAL High Income
h-l rebate initial charge 5% and annual .25% of 1.5%
BlackRock UK Absolute Alpha
h-l rebate initial charge 5% and annual .1% of 1.5%

Could we do as well or better in a pension on those funds and should we be expecting that sort of result from any IFA?
Say £1.5k each as a lump sum or per year like an ISA.

(I'm asking because I might be doing this sort of thing later in the year).
(and I don't get anywhere near the figures here when I value pensions against ISAs in my circumstances)

Retired_I.F.A.

Re Risk:

Remember your looking to save towards retirement which involves an investment till you die. Every political party recognises the need for incentives such as tax free growth and tax relief on pension plan contributions to encourage folks to save for their latter years and they have been committed to doing so for many many years, not just in this country either..

Tax exempt savings in the U.K. kicked off with tessa's then peps and now isa's and although they are accepted as being here to stay by some the long term likelyhood of their existence is a gamble..

nrsql

Retired_I.F.A. wrote: »

Re Risk:

Remember your looking to save towards retirement which involves an investment till you die. Every political party recognises the need for incentives such as tax free growth and tax relief on pension plan contributions to encourage folks to save for their latter years and they have been committed to doing so for many many years, not just in this country either..

Tax exempt savings in the U.K. kicked off with tessa's then peps and now isa's and although they are accepted as being here to stay by some the long term likelyhood of their existence is a gamble..

>> Every political party recognises the need for incentives such as tax free growth and tax relief on pension plan contributions

Actually they see the need to say that. They also see the need to fit pensions in with their overall plan. If they think they can get away with feeding the treasury from pension plans they will do that (and have).
Don't you remember the tax raid on dividends, allowing companies to stop funding pension schemes (and to take money out), lack of support for schemes that went bust and lost pensions, ....

I can envision a time where there would be a more serious raid probably on high value funds.

People also said that tax relief on mortgages would never be abolished because the government realised that people wanted to own their own houses and it was part of pension provision.

dunstonh

Don't you remember the tax raid on dividends, allowing companies to stop funding pension schemes (and to take money out),

It is commonly quoted that it was a raid on pensions but it also hit ISAs and non taxpayers with unwrapped holdings.

lack of support for schemes that went bust and lost pensions, ....

A very small minority have had problems. A vocal minority and a couple of hundred thousand people is a large number in it's self but when taken in context with the population and number of people that have a pension it is small. Plus you do now have protection.

I can envision a time where there would be a more serious raid probably on high value funds.

There already has been. The lifetime allowance takes care of that. However, the only real major change in future is the abolition of higher rate tax relief. The NPSS will not have higher rate relief on it and that is possibly a sign for the future. Although currently the systems would cost more to amend then the tax relief saved so its not likely in the short term.

People also said that tax relief on mortgages would never be abolished because the government realised that people wanted to own their own houses and it was part of pension provision.

I cannot remember MIRAS being presented as an option for retirement.

EdInvestor

The worst risk IMHO is the fact that you can't get the money out if the pension rules change in a way which is to your disadvantage - which they have done regularly in the past.

purch

Take h-l for instance.
for an isa you get a rebate of some initial charges when buying a fund and a loyalty bonus.

There SIPP doesn't give the loyalty bonus and has an annual charge for some funds.

The Initial Charges for Funds is identical whether you hold in an ISA or SIPP

The Loyalty Bonus reduces the AMC of some Funds by 0.15-0.25 % p.a. typically (although a few a slightly higher) and needs to be factored into the equation

dunstonh

EdInvestor wrote: »

The worst risk IMHO is the fact that you can't get the money out if the pension rules change in a way which is to your disadvantage - which they have done regularly in the past.

Of course the risk of doing nothing is the worst risk. Whether you do a pension or ISA is small fry in comparison.

If we look back in time, using an ISA (or PEP) to delay the contributions into a pension until later would have been a bad move. (tax relief was much higher in the past and has only gone in a downward direction). There is no guarantee that it will be good or bad in the future as the future is unknown.

The last batch of pension rule changes were basically positive and improved a number of things with pensions. In fact, there hasnt really been any rule changes in the last two decades which have been negative on pensions. The real difference is that the alternatives have got better and closed the gap somewhat.

The Loyalty Bonus reduces the AMC of some Funds by 0.15-0.25 % p.a. typically (although a few a slightly higher) and needs to be factored into the equation

I dont think it should as that is one particular provider. There are always going to be chaper and more expensive providers and worrying about 0.15% per annum isnt a big deal. I can get my annual management charges 0.5% lower the standard. So, I think its best to assume equal charges as that is the default. One days performance can be a lot more then +/- 0.15% so its neglible.

I think it would be better to use 5% for income on ISAs though. That figure is a more realistic long term average that has been obtainable for income. 6% may not be achievable at the time or not without having to eat some capital and hope to rely on growth to cover it.

nrsql

>> when taken in context with the population and number of people that have a pension it is small

Doesn't really matter if you're in that number.
That's the risk with pensions - if you're in a targetted miniority most other people won't think it's a big issue and their's nothing you can do about it as you are stuck in the pension wrapper.

That's the differnce between pensions and ISAs when there is a change detrimental to both - with an ISA you have an option to get out - not so with a pension. Hence the risk associated with the wrapper.

The decision is whether the extra risk is worth any expected gain.

About MIRAS we obviously have diferent recollections.

dunstonh

That's the risk with pensions - if you're in a targetted miniority most other people won't think it's a big issue and their's nothing you can do about it as you are stuck in the pension wrapper.

You shouldnt compare final salary pension scheme failures with the pension wrapper. Two very different things which happen to be called pension.