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My main take away from that video is that regulators/govt have completely failed to regulate banks/institutions and the required liquidity they hold.
I’m a bit late to this discussion and apologies if it’s already been said, but Royal London are not only available to IFAs. I have 3 Royal London funds in my SIPP through Interactive Investor, all of which have done well. I’d never go back to using an IFA - can get much better returns with lower fees very easily, just with a modicum of research.
Vanguard isn’t a bad option but there are some pretty poor performing funds in their portfolios which affect the overall returns.
For those people who have used an IFA (whether paid by commission or fixed fee), how often and for how long do you expect them to be "available" to work with you or do work/research on your behalf?
Or more pertinently, has an IFA ever told you to piss off (in a nicer way, of course!) cos they have to spend too much time looking after your affairs? Or tried to charge you extra cos of the workload you generate?
(Reason I ask: I want my IFA to run multiple "what if" scenarios to help me decide on asset allocation, drawdown options and different retirement date scenarios. When I last asked her about it, it involved a two+ hour meeting and I only got documentation for one scenario, so I'm not sure how keen she's gonna be to figure out at least three different scenario types and mix them together... particularly as I just asked her to close an expensive, high commission fund and transfer to a MUCH lower commission fund 😄
This is all such a minefield isn't it.
As i get closer to the 55 year milestone, the thoughts of pulling a chunk of it out at 55 loom high on my radar, not really because i 'need' anything desperately... but because it's tax free i guess, so therefore in my mind makes sense to take it while i'm not being taxed on it.
There's the downside of having 'less' when i get older of course... but my logic is that by the time i'm 70, i won't need as much anyway as i won't be spending fortunes on bikes/life/mortgages etc... So my needs will be lower.
By taking TFC at 55 you are reducing the tax free sum you are ultimately going to get, its growing in a very tax advantageous environment (including IHT) so leave it till you actually need it.
By taking TFC at 55 you are reducing the tax free sum you are ultimately going to get
But surely there's a limit to how much you realistically are going to need anyway ? There's no point having say £3000 a month if you've got no mortgage and debts ?
The scenario question by Vlad would be whatever your client agreement states. You may get more than one face to face meeting but retirement income scenarios is likely to be covered by an additional fee. This work would best be done simply via cash flow modelling, so make sure your IFA offers this service.
There are a number of ways of taking some of your tax free lump sum. If you have a SIPP you can crystalise some of the SIPP then take 25% of that tax free. You can leave the rest invested which means that when you come back to take more of the tax free cash the whole pot may have grown meaning if you manage it carefully you may end up with more than 25% of the whole, tax free.
I realise I have worded that poorly so here is video explaining it.
But surely there’s a limit to how much you realistically are going to need anyway ? There’s no point having say £3000 a month if you’ve got no mortgage and debts ?
Yes and you have to factor in future income streams against your outgoings. I have quite a detailed analysis of our outgoings against our income, including current pensions, SIPP drawdowns, future one of tax lump sums then state pension. Even though I will take around 8% from our SIPPS for the next 3 years, in around 7 years (assuming investment growth around 4%) we will actually stop taking out of our SIPPS (if we choose to) and they will hopefully be worth more than they are now, in around 10 years... (of course this is market dependent) At around 75 our income (factoring a few % for inflation) will be very healthy and I dont think we will need it. Given my mum developed Dementia and lost all of her assets to pay for her care I would prefer to go before that happened (easier said than done I know) My analysis stops at age 80.
That video about drawdown, I get it, but don't necessarily understand it....
Interesting video. Can someone fact check this idea though. He argues than rather than take you max lump sum you take part and leave the rest invested to (hopefully) grow.
Could you do the same thing by taking the max tax free lump sum - £25k in his example - use your £10 for whatever and stick the remaining £15 in an ISA? Therefore any growth will still be tax free and you have complete freedom to take it out the ISA any time it is needed with no tax payable.
I like the idea of having investments in an ISA rather than a pension as there is no danger of ever hitting the higher rate tax band if you need to withdraw a big sum for any event. House repair/extension etc.
Yes you can, provided you keep to the 20K per year ISA limit.
hitting the higher rate tax band if you need to withdraw a big sum for any event.
The ISA route is one way of doing it but you could also just take a big chunk of your remaining 25% tax free allowance in an emergency. BTW you can crystalise and drawdown £67k in the current tax year without paying 40% tax.
Edit: As long as that is your only source of income
Yes, drawing part of your TFC is just known as Phased Drawdown, you can even do this on a monthly basis if you choose so part (25%) of the income payment is tax free, the remainder taxed at your marginal rate.
But surely there’s a limit to how much you realistically are going to need anyway ? There’s no point having say £3000 a month if you’ve got no mortgage and debts ?
Are you arguing that there's "no point" having more than basic food money?
Humble brag gone wrong.
Ive seen clients 'needing' £10K+ per month to fuel their lifestyle, life can get expensive when you have all that leisure time on your hands.
Some low fee "whole of the market" funds to look for, for those without a crystal ball looking to drive down the fees:
Invesco FTSE All-World UCITS ETF .15%
HSBC FTSE All-World Index C Acc .13%
I use the Vanguard platform as it was lowest platform fee when I opened my SIPP.
VWRP is .22% but you can get the fee down further by: putting 10% inn VFEG .22% and 90% in VHVG .12% - this is what I do for lower fees than LS100 and effectively the same thing.
I have my current workplace pension which I (over) pay directly from employer into via salary sacrifice - because of this I save not only tax at 20% and the bit of 40% I would pay too without having to do a tax return, but also 10% National Insurance which you wouldn't get back outside of workplace salary sacrifice.
My Old workplace pensions (except a nice DB scheme I left) are brought together in my SIPP.
Because the fees are high in my workplace pension, every year I do a partial transfer to my SIPP to get it in low fee funds above.
I really hate fees. £15k fees proposed to the OP is DAYLIGHT ROBBERY. A little knowledge goes a long way.
Are you arguing that there’s “no point” having more than basic food money?
Not sure how you got that from what i said. But I don't see the point having say £1000 more a month than you need. As it then just goes back into 'savings' which is somewhat pointless IMO. If i've retired i'd rather spend a chunk at the start for whatever reason and then have 'enough' rather than excess. Of course you can never have too much money at a normal level of income.. It makes sense in my head.
Thats the beauty of drawdown though, you are not forced to take a set amount or indeed any income at all if you dont need it.
Not sure how you got that from what i said.
You said
There’s no point having say £3000 a month if you’ve got no mortgage and debts ?
I'd bloody love to have £3k a month with no mortgage or debts! It would be amazing! I don't see how there's "no point" to it???
He is saying theres no point in taking it out of a pension, paying tax on it and not spending it, to then put in an ISA or something.
May as well leave it in the pension until (if) you need it.
If you are spending it then crack on.
The only issue with picking individual vanguard base trackers as opposed to the LS100 is rebalancing manually, which is I suppose what they charge extra for.
Isn't that the Vanguard Target fund product aim?
It stays aggressive with net income reinvested but at certain time lines it reduces risk by moving out of shares in say , emerging markets Asia , Brick and back to FTSE or Dow stocks
Then into cash , guilts and bonds for the last few years?
Personally I think you can do better than Vanguard funds if you do some research. My SIPP has returned more than double what the best Vanguard Target Retirement or LifeStrategy funds did this year.
As for whether US funds may correct at some point - yes I guess so, but it’s a no brainer to go for US / Japanese / world funds vs UK funds.
Last 10 yrs FTSE up 15%. FTAS up 18%. Dow Jones up 212%, Nasdaq up 485%, S&P up 272%, Nikkei 225 up 249%. If you’re going for low cost tracker funds avoid the UK!!
Only if you own a Delorean .
You can pretend to know more about the market than the professional traders . But the reality is no one knows what is around the corner. Like 9-11 for example. You can diversify for sure to try to limit your exposure to each market.
What you can control is the costs. These make a huge difference to the amount you end up with after a few years . Thinking you are special because you got lucky with the choices you made about where to invest 10 years ago is a fools erand. Especially when there's a sustained bull run on most markets lasting years.
Especially with diversified funds where you bought shares in hundreds of companies. It could have gone down by just as much as it went up ( on paper , the reality is alot less likely)
That’s kind of the point - investing in low cost trackers nearly always works better than managed funds where traders think they can beat the market and charge clients more for the privilege. In reality the majority of actively managed funds perform worse than index trackers.
Vanguard Portfolios are not very diverse by definition since they are all Vanguard funds. You can easily make a much more diverse portfolio using a SIPP platform, and with even lower fees - provided you have a reasonable amount to start with, platform fees for Interactive Investor all lower than Vanguard. If you want to, you can still invest in Vanguard portfolios but without around half the yearly account fees.
I was doing amazingly with my favourite funds until 2022. Way ahead of the market. Now one of them is 50% down, another down 45%, then changed provider, then renamed , now slightly different style, basically baking in the previous loss. Luckily I also had a US tracker with 0.1% fees that I’ve held for 10 yrs + and a vanguard global that have saved me.
Global trackers don’t pretend to be the best every year, but they do provide very good low cost long term diversified investments.
Anyway, I’ve emailed the IFA to let them know I won’t be proceeding. It just didn’t stack up that in the first 12 months, my fund, based on their own projections and modelling would be worth less than had I not gone with them. Kind of a tough sell, especially to a Yorkshireman!
Im expecting a pressure call tomorrow.
So the plan, possibly, is to leave everything where it is aside from two slightly less good Aviva pensions and put those into a Vangaurd 60/40 though ii. These Aviva are just over £100k so a tidy £1,250 cashback and low fees.
Yep II are a great platform and a cheaper way to invest in Vanguard with that amount. I’d also look at diversifying a bit more with other low cost world and US tracker funds from various providers like HSBC, L&G, Royal London, Fidelity etc plus there are ETFs tracking S&P500, Nasdaq and the like. Loads more choice than just Vanguard on the II platform.
Having multiple funds just for the sake of it, most will be exposed to exactly the same market. If you are picking a naturally broad diversified “fund of funds” I’d KiSS and go for the lowest fees.
It’s a fair enough point but if I’d gone with that I would have left my pension with Vanguard, and it’s done much better with my own mix of funds, which does include Vanguard but also others plus ETF trackers. Might not prove to continue to be the case though! There are some curious and pretty poor performing funds in their portfolios and a continue insistence on relying heavily on bonds as the ‘safe option’ even though they’ve done terribly for the last several years.
Hindsight is brilliant for investing. I’ve got possibly 15 months before I decide what to do with my career so I need relative safety.
I have three kids, and I’m putting money into relatively “riskier” funds for them. Youngest should have forty years in the market before being able to access it. They can ride the ups and downs!
Edit, the vanguard is cheap and a safe home for the Aviva funds for the time being. I’ve also got a Prudential pension, Aegon work pension and some wide ranging funds through a HL SIPP.
Risk is a curious thing especially regarding the ‘lower risk’ investments. Using Vanguard as an example, their LifeStrategy 100% equity ISA is the ‘high risk’ option, but lost just 6% in 2022 when most investments dropped, as well as making more during growth years. The 80% 60% and 40% equity, supposedly lower risk and therefore insulated against dropping markets, fell 9%, 11% and 13% respectively. So going for the safer option not only gave you less growth in the good years but also more losses in the bad ones. So pretty much exactly the opposite of what they intended.
I have to admit, I struggle to get my head around traded bond funds and their value. I’d far rather hold actual bonds from issue to maturity, but that isn’t available on many platforms.
"Using Vanguard as an example, their LifeStrategy 100% equity ISA is the ‘high risk’ option, but lost just 6% in 2022 when most investments dropped, as well as making more during growth years."
As it happens all my Vanguard is in the 100% equity. I took the attitude that as I have a DB pension I can afford a risk. Also I have around halfe my investments in Fundsmith so a bit of risk spread. Fundsmith hasn't done so well the last few years but I stuck some cash in the year it opened (my member number is in the 300s) which has grown 567% in 14 years.
https://www.fundsmith.co.uk/factsheet/
A lucky pick because I thought the investment strategy sounded sensible. Around one third of what I had in 2010 was in Fundsmith the rest on a couple of other places which did less well and were gradually sold.
I had a small works DC pension in Aviva for around a decade. Supposedly a safe strategy but to me it just looked like it missed out on most of the gains from a rising market.
I have a theory that supposedly risky shares investments only need a few years of good growth and you are so far ahead of "safe" funds you can hit a couple of bad years and still be ahead.
……..depending on your timing. I had some amazing returns in Baillie Gifford funds post pandemic, but oh my how they have fallen now!
If the big falls happen at the start of your drawdown period it makes a massive difference to your portfolio.
With 10-12 years until retirement, stable 7% returns will see my pot nearly triple by retirement - compounding works best as your pot gets bigger. I would bite your hand off right now for 7% annual growth until retirement.
Interest rates. That's the root cause of some of those poor performances noted above. The Vanguard lifestyle asset mixes are based upon sound actuarial principles of moving more of your assets into bond funds as you get older because they are meant to be more stable. And for a large part they are. And they were especially favoured by declining interest rates from 2008 until 2022. But the increase in inflation and associated rise in interest rates rightly proved bad news for bonds and that has hampered all lifestyle strategies. Arguably we're entering a more stable environment inflation and interest rate wise and that should ensure bonds stabilise, possibly thrive. The long decline in interest rates also flattered the returns from growth strategies such as Fundsmith & Baillie Gifford, so that even though they may have been following sound investment ideas (and I too am a long term holder of Fundsmith) their results were somewhat turbocharged and Baillie Gifford thought they walked in water. Which they don't, not forever.
No need to overthink ETF providers or their asset allocations; Vanguard will do the asset allocation and their S&P 500 tracker should perform as AN Other S&P 500 tracker. If you want to start thinking through asset allocations, you'll quickly start trying to find managers who you think will outperform your preferred index, and then you'll start selecting the shares you most prefer in your chosen manager's fund, and you'll end up either (i) underperforming the Lifestyle approach and worrying about it, or (ii) spending your whole time doing investing stuff
Or both!!!🤣
I’ve spent the weekend researching bond funds, with expectations we have reached peak interest rates, they are currently attractively priced with good yields.
With 10 years to go until retirement I really needed to start phasing in some bonds.
It’s an interesting principle and theoretically I should be doing this too. My take is that if I retire in 10 years but take money out as slowly as possible, likely do some part-time work to minimise pension use until I get to state pension age, it’s basically still a 30 year + investment as therefore no need to change approach. It may well be a good time to consider bonds though, although I confess to not understand them much.
By which I mean I don’t understand the perception of them as ‘safe’. Returns are modest even when good and then they tanked just as bad or worse than the global stock market when everything went a bit wrong. So they seem to offer less returns when the going is good and the ability to bomb still when things are bad.
It still seems to me more likely that tracking markets will result in better returns, unless I’m (this would be no surprise) missing something…
There is certainly a view growing that the ever rising us stockmarket may be coming to an end. Outside of 2022, bonds are normally a hedge against falling stocks. I’ve spent the weekend trying to get my head around bond funds and why they move in price as opposed to the base bonds within the funds. With fund yields of 5% and possible falling interest rates, stock falls will definitely make bonds attractive in this market.
The problem in 2022 was that with long term rates close to zero, big & fast rate rises made long term bonds with negligible returns an unattractive investment.
Assuming we're talking about the same thing, the point about bonds is that you get a guaranteed return - it's a fixed interest investment. Whether the price of the bond goes up or down after you buy it (which it will do inversely in relation to current interest rates) is neither here nor there if you're not selling but just getting the interest payment every year (which is of course tied to the face value of the bond not the market price!). They will probably have a redemption date when you get a fixed sum back too, which is known in advance and not dependent on market prices.
Of course there's a chance that the underlying guarantor of the bond will go bust, unless it's the govt, and there's the risk that inflation will rip up the value (unless it's index-linked). But it's lower risk than shares where the underlying company may just go bust at any point.
Agreed although in the sense of a SIPP, or indeed most pensions, you’re likely actually investing in a fund based on returns on bonds rather than directly the bonds themselves. I see the potential stability of them but also the fact that this proved not to be the case in the last few years.
Clearly if the US stock market is headed into terminal decline then mine and many other pensions will be f****ed…but the same people predicting this probably also predicted the Chinese stock market and economy to be taking over the world, which it isn’t, and have probably also been predicting the collapse of the UK housing market for about the last 20 years…
One thing is certain Noboby can actually predict the future. We are all making guesses, some less educated than others. I used to think I could beat the market & make massive returns. Now I just want bang average returns and to survive any big downturn.
The point is there’s no need to beat the market to get good returns. If you avoided the FTSE then trackers would have got you 20% or more in 2023 without trying to be clever or beat the market.
With hindsight that’s correct, but looking at just 1 year is dangerous, plus you get stuck in a rut with previous choices and don’t want to sell them at a massive loss. What would’ve made you avoid the FTSE before 2023 though, if your policy was just trackers?
Without doubt if I was starting again, it would be a global tracker for 40 years and leave it well alone.
The potential downside to a global tracker is that ~70% will be in US equities and ~18% in the ‘Magnificent 7’. So a correction in the US plus a strong $ versus £ will have a big impact. Don’t get me wrong, I have a global tracker as a core holding but also have additional trackers in other regions including the UK
Same here. Mostly global Trackers and then a couple of Royal London global funds that had high ratings but slightly higher fees and so far have performed well, plus S&P 500 and Nasdaq trackers and US trackers.
Why not specifically UK? FTSE hit nearly 7000 in 1999 and in the subsequent 25 years has hardly grown at all. FTAS somewhat better but I figure the small amount of UK shares in the global trackers is enough.
I agree wholeheartedly about UK performance - my point was that the strategy you used is trying to beat the market by using aquired financial knowledge rather than just use a global tracker. In no way a criticism.
My Portfolio for info currently consists of:
Trackers:
Blackrock US Tracker
Vanguard LS100 global
Blackrock global (ex UK) tracker -
Active:
Baillie Gifford Global discovery B
Baillie Gifford European B
Baillie Gifford Pacific B
Baillie Gifford International
Bonds (new)
Blackrock sterling liquidity
Blackrock Over 15 yr Corporate Bond Tracker
Blackrock Corporate Bond All Stocks tracker
The active funds have been a rollercoaster to say the least!
Re: bonds
Did you buy them directly or your own the bonds yourself) or are they in fund (so ownership is shared)?
I'm clueless about most of this but particularly about having some "lower risk" asset allocation
Bond funds. My Worpkplace pension with aviva doesnt allow me to hold individual bonds. Ive been trying to educate myself about them as I had no idea of how the bond fund market worked.
Pretty sure in my SIPP I could buy either bond funds or actual bonds, themselves but as with shares I assume you’d need to be well informed to know what you’re doing if you did that.
Yep, think you can in most funds, just not my workplace Aviva, it’s quite limited.
Im considering transferring out 200k to an II SIPP, benefitting from the £1500 cashback offer from them too, as well as a wider choice and very low fees. At 200k, I will be halving the 0.15% platform fee Aviva charge me. The cashback is the same for any amount from 100-500k
I think II is a great platform, very easy to see how things are going and research your options, the fee is just a monthly amount so the more you have the less it is in percentage terms. From about 75k upwards it’s about the cheapest option out there. Customer service is also excellent, from my experience anyway.
…I appear to have somehow quoted myself…
Bonds are much simpler but there are loads of them, the Bond markets dwarf the equity markets. You are generally just buy a loan so receive interest and your money back. Most bond market are dominated by the primary market, i.e the initial issue of them to investors, secondary markets (i.e after the initial offering period) tend to be relatively illiquid as they are traded over-the- counter rather than on exchanges unless you are looking at government debt.