DB Transfer out, Have you done it and how has it gone

NoMore · 21 November 2018 at 12:32PM

I am worried that only people that it worked out for are going to reply to this thread giving a distorted and biased view to the viability of said transfers.

dunstonh · 21 November 2018 at 12:38PM

You are not going to get a worthwhile answer until 20-30 years time when we see how many blew the money, how many worked it correctly and how many panicked when the first stockmarket crash occurred. (20% drop on a £400k fund is £80k. How many have never invested before and have the stomach for a drop of that amount - even if it is routine)

DairyQueen · 21 November 2018 at 1:07PM

aphill24 wrote: »

Thanks for the response, I was asking for more information on how the Sipps have performed rather than the reasons for opting out which I fully understand.
If people have been succesful with their investments would they share it as 99% of my workmates are going with Prudential and are told of all the positives that could happen but not many are mentioning the possible falls to their pots. The fact that they might not be making the correct decision is not what I want to discuss really.

I'm not sure I understand what you mean. The investment wrapper is unrelated to performance although platform charges will effect the return. My asset allocation is specific to my timeframe, attitude to risk, aims and objectives. The performance of the underlying assets has zero connection to how they are wrapped (or unwrapped).

I have no knowledge of the Pru's offering. If it offers a selection of funds then, presumably, each individual's portfolio will perform differently depending on specifics of fund choice.

Our self-managed investments are held within SIPPs and ISAs. Plus we have a small percentage in unwrapped shares, plus cash held across various accounts. The spread of assets includes equities and bonds/fixed assets. The wrapper/platforms are only relevant from the perspective of tax and charges.

There is no value in comparing how my (or any else's) transferred funds have performed against those of any one of your colleagues. It depends entirely on asset selection and asset selection will be the product of the factors mentioned above.

I have a medium/high attitude to risk. My portfolio will begin drawdown in around 5 years. The portfolio will be drawn down over a period of 15/20 years. I am able to suspend drawdown if I wish. There are many other factors that feed-in to my asset selection. My circumstances are unlikely to compare to any of your colleagues. My asset selection ditto.

Anyone invested in equities over the last year will have experienced volatility. The performance of their portfolios will depend on the percentage of equities versus cash and fixed assets. It will also depend on their geographic and sector allocations.

My portfolio is up around 1.45% on the year (net of charges). I'm satisfied with that. So far, the fixed assets are doing their job and protecting against extremes of volatility. I accept that tomorrow/next month/next year/sometime there will be a market crash and I could see the value of my portfolio drop by 20% or even 40%. The market will crash at some point and, depending on level of exposure to equities, the downside for some could be as high as 60%.

If your colleagues believe that the markets are a one-way (upward) sure bet then they haven't understood the risk they have taken-on. Unless they have left the entire pot in cash (in which case it will inevitably devalue courtesy of inflation) then they will be exposed to some level of risk. The higher the potential return (i.e. the higher the allocation to equities) then the higher the risk. Nobody should ever consider investing in equities over a period of less than 5 years (if they are risk tolerant) and, preferably 10+ years.

Over the long term equities have historically out-performed other investment classes. However, there is no guarantee that anyone investing today will see any return within the next 10/15 years. Bear markets can be long. They can be short. It's impossible to time the swing from positive to negative (and vice versa).

Thrugelmir · 21 November 2018 at 1:14PM

aphill24 wrote: »

Thanks for the response, I was asking for more information on how the Sipps have performed rather than the reasons for opting out which I fully understand.

Not so much as to how investments held in SIPPS have performed in the past. More a question of how they perform in the future. QE has played an influential part in recent market performance. With the taps finally turned off. The reaction to a period of cold turkey may result in far more volatility.

aphill24 · 21 November 2018 at 1:31PM

Thanks what I meant was what you answered, IE Up 1.45% net of charges on the year. They are being promised 4% growth during draw down plus the 25% tax free Lump sum is more than the sum they get from the Ford db scheme.
They are all making it sound so simplistic that the kids will get the sipp if they die and would rather this happen than stay in the db scheme where the children don't get anything. The OH get 50% if they are married but when they pass there is no other beneficiaries to the fund.

Thrugelmir · 21 November 2018 at 1:42PM

aphill24 wrote: »

They are being promised 4% growth

Unlikely there's a promise or guarantee to this effect. Though the 4% figure often gets bandied around in another context. Though initself this has morphed into being fact than having a substantive foundation.

dunstonh · 21 November 2018 at 1:50PM

There is no promise. It will just be a projection of what is considered a reasonable expectation.

Linton · 21 November 2018 at 2:02PM

aphill24 wrote: »

Thanks what I meant was what you answered, IE Up 1.45% net of charges on the year. They are being promised 4% growth during draw down plus the 25% tax free Lump sum is more than the sum they get from the Ford db scheme.
They are all making it sound so simplistic that the kids will get the sipp if they die and would rather this happen than stay in the db scheme where the children don't get anything. The OH get 50% if they are married but when they pass there is no other beneficiaries to the fund.

Two problems with equating the expected growth with the drawdown...

1) Inflation - if the 4% was constant every year and it was spent rather than re-invested, income in future years would be constant in £ terms thus steadily falling behind inflation. The DB scheme would match inflation at least up to some maximum.

2) Fluctuations in return. What happens if one year the investments drop by 4%? If you withdraw the money you need to live on you will be cutting into the capital required to provide future income. The DB scheme would have continued to pay regardless.

TBC15 · 21 November 2018 at 2:46PM

Did the change July 17 on £174k put it all in Fundsmith. It’s now worth £199k. Happy about it as gives me greater flexibility and control.

atush · 21 November 2018 at 2:59PM

Thrugelmir wrote: »

Unlikely there's a promise or guarantee to this effect. Though the 4% figure often gets bandied around in another context. Though initself this has morphed into being fact than having a substantive foundation.

With a DC pension or Sipp there is no promise or guarantee.

DB Transfer out, Have you done it and how has it gone

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