£340k to invest

newhit

I was wondering how a stocks and shares ISA can be used with this 340k. I thought an ISA is limited to £7000. Or do you mean ISA's within the plan. Sorry for my ignorance
As far as the 5% is concerned, it's my bad arithmetic.
Inside the wrapper is the Prudential allocation of investments, from this I choose a selection.
Regards the "allocation above 100%", not sure what that means.
Definitely worried that "with profits" is discredited. I have been advised that this is nice and simple.

Regards the register, I think I should be careful what I say.......... I probably put the wrong info in.

If ppl think I'm getting out of my depth I suppose I need to know of alternatives now. However, being able to spread the capital around outside a wrapper would be worrying for me.

Is there a website that I can go to regarding any pension options for me and my wife?

turbobob

Did you have "market value reductions" explained to you? This is a feature of with profits funds and, I think, is one of the factors that has given them a bad name in recent years. Some explanation of some of the terms people have used are here - http://www.pru.co.uk/existing_customers/products/bonds/pib_psa/product_charges/

Yes you can only invest £7200 per tax year in an ISA, per person. However, just because you can't put all of the money in one does not mean that they should be ignored.

jem16

newhit wrote: »

I was wondering how a stocks and shares ISA can be used with this 340k. I thought an ISA is limited to £7000. Or do you mean ISA's within the plan. Sorry for my ignorance

The first investment that should be recommended to anyone is the tax-free investment of an ISA. Yes the limit is £7200 each year but this should always be used first.

Was no ISA recommended?

Inside the wrapper is the Prudential allocation of investments, from this I choose a selection.

Why are you choosing the funds? Your IFA should be choosing a spread of funds matched to your risk profile. This mention of you choosing the funds sounds more like a tied adviser (or better known as insurance salesman) than an IFA.

What have you chosen?

Regards the "allocation above 100%", not sure what that means.

An investment bond generally comes with an initial allocation above the amount you have invested (100%) This is to offset the higher charges normally found on these bonds within the first 5 years. For your age and amount the initial allocation is apparently 101.5% on the No Initial Charge Option and 103.75% on the Initial Charge Option. Which option are you going for? This basically means that if you invest £340,000, an extra £5100 or £12,750 will be invested by Prudential for you.

This initial allocation can also be enhanced by your IFA taking less commission from the Bond than Prudential pay him/her. This can take the allocation up another 5/6% depending on what commission your IFA is taking.

Do you know what commission your IFA is taking? Or are you paying a fee?

Definitely worried that "with profits" is discredited. I have been advised that this is nice and simple.

Who advised that - the IFA???

If simple means you get to choose from 2 funds then yes it is simple. It also increases the risk for you.

Regards the register, I think I should be careful what I say.......... I probably put the wrong info in.

I'm sure you wouldn't have done that. This doesn't sound like good advice so perhaps better for you to say who they are.

If ppl think I'm getting out of my depth I suppose I need to know of alternatives now. However, being able to spread the capital around outside a wrapper would be worrying for me.

The idea with £340k is to be able to spread the capital around to diversify the investment. You should probably be looking at least 15 funds for an amount this large.

To be honest the advice you have got does not sound to be from someone who specialises in investing.

Is there a website that I can go to regarding any pension options for me and my wife?

Try asking about pensions in the pension board here.

jamesd

newhit wrote: »

Definitely worried that "with profits" is discredited. I have been advised that this is nice and simple.

Find another adviser. If they make any fuss at all about you backing out, point them to this discussion and ask them for a reasons why document that explains why the investment bond wrapper was suitable for you and why the investment meets your needs compared to a sector allocated selection of funds and to ask their compliance officer review this sale as a precursor to possible report to the FSA.

newhit wrote: »

Inside the wrapper is the Prudential allocation of investments, from this I choose a selection.

Bad sign, suggest that it's not really an IFA but just an FA, which is often another way of writing sales person who isn't authorised to help you pick investments but must instead ask you to do the job an IFA would do for you.

The adviser is supposed to be working with you to select the investments within the tax wrapper (the investment bond is the wrapper) based on your risk tolerance (how much up and down variation you'd be comfortable with year to year, 20-30% is reasonable). This description suggests that the adviser is telling you that they don't intend to do a proper job of that. Or that they have documented this sale as you "picking" the with profits fund because they really just a sales person, not an IFA, and aren't authorised to do the investment selection and planning part of the work.

jem16 has explained how initial allocations work and if you aren't getting an allocation over 100% with the apparently sub-standard investment selection work you're getting, you're being ripped off.

newhit wrote: »

I was wondering how a stocks and shares ISA can be used with this 340k. I thought an ISA is limited to £7000. Or do you mean ISA's within the plan.

You'd use the ISAs outside the plan, putting the money in gradually at 7200 per person per year. Growth investments aren't the first choice within the ISA (they pay 18% capital gains tax outside it, 20% inside the investment bond). Interest producing investments would go into the ISA first (corporate and government bond funds). The growth funds generate income by having a portion sold once or twice a year.

You might use the investment bond for some part of the investments (they can sometimes be cheaper for the income-producing part when purchased from a competitive vendor but the lack of any discussion of an over 100% initial allocation suggests that this is not going to be the case for you).

newhit wrote: »

Sorry for my ignorance

That's entirely fine here. But... your IFA, if it is really an IFA, should not have left you not knowing your options. It's part of their job to explain these things to you. It sounds more as though it's just a bank sales person and those are authorised only to present their products for you to pick from.

newhit wrote: »

Is there a website that I can go to regarding any pension options for me and my wife?

Have a read of ISAs v Pensions: The Official Retirement Debate to get some discussion of the relative merits of pensions and ISAs.

Those who are working can put up to 100% of their salary (up to a cap of a bit over 200k per year if they want tax relief) into a pension and get tax relief. Those not working can put in 3600 gross (after tax relief added) per year and get basic rate tax relief.

If neither of you is working an investment bond might be useful as a tax wrapper for part of the investment.

jem16, there are about 60 funds available within this product. Not a great range, but not appalingly bad - not one I'd be happy to use myself because there are better ones available.

jem16

jamesd wrote: »

jem16, there are about 60 funds available within this product. Not a great range, but not appalingly bad - not one I'd be happy to use myself because there are better ones available.

It was the OP's use of with-profits that led me to mention 2 funds. Out of the 60 or so available only around 2 seemed to be designated as "with-profits".

Of course the OP may not have meant that.

However I do agree that there are better investment bonds available both in fund range and initial allocation.

newhit

Once again, many thanx fore all the replies.

It's obvious that I have not checked properly what has been flagged up here. The advice I'm getting is obviously not thorough enough and I need to present this thread (if that's allowed) to my adviser or possibly another adviser.

I will go away and digest all that's been said. There are a number of questions that need to be answered and as such will take some time to chase up.

Thanx to all who took the trouble to answer.

PS
It's a b***"y good job I parked up here:beer:

jem16

newhit wrote: »

Once again, many thanx fore all the replies.

It's obvious that I have not checked properly what has been flagged up here. The advice I'm getting is obviously not thorough enough and I need to present this thread (if that's allowed) to my adviser or possibly another adviser.

I would give your adviser (assuming it's an IFA and not a tied FA) a chance to address your queries. He/she may have reasons for the choice if he/she has done a full fact find and knows all the information about you and your circumstances that obviously we do not know. Possibly better to ask the questions rather than produce a copy of this thread right away.

I would have to stress that you be sure this is an IFA and not a tied FA. You obviously do not want to mention names here but if you do want it checked send a pm to either myself or jamesd who I'm sure would check the register for you.

If it turns out to be a tied agent you have seen then you would be better seeking out a proper investment specialist IFA. You can look here for some;
https://www.unbiased.com

newhit

Just an update to show that I have listened to you guys.

I am with an IFA who is not tied. I have checked and have satisfied myself that my adviser is on my side. I know, what is proper checks for a person like me? I have to move on from this as "I THINK" I've done enough.

The "with profits" has been ditched. I hope this doesn't cause debate here as it seems that this is not ideal for me.

I have moved to a plan with more risk but a guarantee that I will get back all my capital after 5 years if I opt out, but with better prospects, plus I have had my costs/penalties explained to me.

I do not have to choose any funds or investments.

I have also got two ISA's (one for me and one for my wife).

My 5% queries (tax and income problems) have been answered.

I have removed the MVR problem by changing my plans.

If I've missed something, and there must be lots, please be gentle.

Once again, thanx to all who pointed me in the right direction.

PS
I have found out what an OEIC (oick!) is and it's relevance to my situation. Worth the asking.

dunstonh

With Profits is not fully dead. There are really only two viable providers of this still. Norwich Union and Prudential. The Pru version comes in 2 with profits funds with slightly different aims (and risk) and the Pru fund. I still have some of these on my books and have no intention of changing them as they have been consistent double digit performers and suit the objectives of the individuals concerned (who also have ISAs maximised annually and a range of collectives). However, you wouldnt go 100% into one as that would be a little on the daft side.

NU have a with profits fund with a minimum RPI guaranteed increase after 5 years which is not a bad option but the problem is the tax wrapper and its only available in investment bond form. That is a minority tax wrapper.