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I believe it's a gross amount, before any tax.
Don't get too hung up on the exact figures, they are a useful guide only. There will be big variations for geography and personal circumstances. As you get closer to retirement you'll probably want to try and work out your own figures.
The figures are built up from spending requirements and are therefore net of tax.
As i have noted in previous threads, financial planners observe that retirees tend to spend more in their first few years as they make the most of their new time, the spending then drops off a bit as they become more sedentary, and then it tends to ramp up in later years due to care costs. But everyone's experience is unique.
Thanks too folks.
I know the tax difference if income of £14k isn't much (give the threshold to start paying is £12570. I was more wanting to know so I understood comparison on the higher figures suggested for 'comfortable' etc).
I'm my case I have a pretty much gold plated as-secure-as-could-be pension coming in now of a reasonable amount - we'd not starve if just stopped tomorrow - but would have to be careful (and will have that income til dead - no government would dare try to screw this one over).
I now have a additional 'defined contribution' pension at my new place (I'm shoving 1/3 of my pay into that, employer pays some too, and it's growing each month, but will never be half a million quid pot or anything near in total as Im defo not working to 65 or more).
What I'm trying to suss out is the 'working backwards' of how much we (I'm married) will want/need, and in turn how much longer to work.
And we do have a couple of fairly expensive things to do on the house (re-roof, re-do block drive, replace double glazing). I reckon I'll buy no more than 1 more car in my life.
Part of the calcs is looking at a decrease in working hours over the next few years. I just dropped to 4 days/wk, and will prob drop to 3 next year or the year after. A slow controlled decline ! There's also plenty other work for me in what I do, if I wanted to drop to a zero hours / ad hoc pin money role.
Also as I'm the major earner in the house (and the one with a pension several times that of my wife), there's a slightly morbid set of calcs to do, if I was to croak it before the Mrs. As what she will get as a widow from my gold plated final salary pension will HALVE when I die. The household bills will reduce (but not by half, maybe 35-40 % ?? Still 1 car, still costs the same to heat and elec, etc) the income overall of my wife will drop significantly. Whereas in reality the other way around I could cope fine on just my pension + 0.5 of hers.
Historically my family live to a goodly age - dad to late 80s, mum still going at 90+, grandma to 99, other aunties and uncles to 90s too. Only ones with lower ages were heavy smokers.
Anyway- lots to go into the melting pot.
And I bought a lovely Shand with a Rohloff hub with some of my pension, so that'll outlive me !
This thread has been very informative.
Annuity pensions seem to be very unpopular. A friend's mum got left with just £50 per month to top up her monthly pension when her husband died, everything gone in a flash, shame he was from a generation where there wasn't much choice and you more or less had to take out an annuity.
Even though I've always had a low paid job, it's been important to put away some pension money from an early age (then it isn't missed). As someone who's much older than most of you here, I'm so pleased and relieved that I do have a small private pension to start taking very soon, this will tide me over until the state pension kicks in. Meanwhile I'm still working, but only part time in my 60's and more importantly trying to stay healthy and fit (this has not been easy).
Cruises are not for me. Not even a 'lying on the beach type holiday' several times a year. But, skiing is something I hope to still carry on with as long as possible, if it means tightening in the belt even more, then so be it.
what she will get as a widow from my gold plated final salary pension will HALVE when I die
this is typical of DB pensions. Perhaps the thinking was that with half the number of people only half the money would be needed? As you describe, the outgoings will not necessarily halve but this is something that you can plan for.
It was the case when one of my parents died that the other got a 50% spouse’s pension from the civil service in due course. It could be the same for me with my SO’s top-notch NHS pension.
given where pensions have gone in terms of DCs, DBs based on average earnings, etc half of a good pension seems like a good deal.
I reckon I’ll buy no more than 1 more car in my life.
So you're not working past 65 and your folks have already +20 years on that - does this mean you're somehow expecting your 'retirement' car to last +12years and the next one the same length of time or that you live somewhere where a car isn't really required?
How many cars have you owned in the last 20 years out of interest?
what she will get as a widow from my gold plated final salary pension will HALVE when I die
This has pretty much happened for ever, it's YOUR pension, not your OH's.
FWIW my Dad had 20 years at 100% from his DB pension, and currently my Mum has had another 10 years at 50% from it - and +25 years of 100% from her own.
Coincidentally, I got my letter from HM Pensions yesterday, confirming how much I'll be getting come November. Given we're currently managing on my company pension plus Mrs Scotroutes salary, she's going to drop down to two days out of eight and maybe even retire herself when we see how that goes. Might be time to upgrade the campervan to something slightly (very slightly) bigger.
what she will get as a widow from my gold plated final salary pension will HALVE when I die
some of the pensions die with you as well - your spouse gets nothing
yes, half seems like an excellent deal to me. I've got a fancy-pants public sector DB pension, and my spouse will get 30.625% when I cark it.
I thought that was good! It's better than what I'll get if she dies before me!
MrsF has already packed in he rat race mid 50's after the last few employers being somewhat 'shonkey' to put it politely. She's doing a day or so a week, minimum wage, in a fabric shop - she's loving it as sewing etc etc is her main hobby.
Started 'looking' at vans for next year for our day vehicle/bike/camping lugger. Fortunately MrsF quite happy with the 'example' I showed her, as it happened to be in a really nice colour (phew). I did warn her most come in 'grey'.
So you’re not working past 65 and your folks have already +20 years on that – does this mean you’re somehow expecting your ‘retirement’ car to last +12years and the next one the same length of time or that you live somewhere where a car isn’t really required?
Not me, but 12 years for a car seems perfectly reasonable? My mondeo is 17 years old and fine, esp as a runaround. You'll use it less as you get older anyway.
On the Q of 'how many cars til I'm in a box... (or care home - or quite possibly I'm not fit/safe enough to drive).
I tend to run a car til it's dead.
How many in my life... think I'm on my 10th, in 38 or 39 years of driving. So you could say '1 in every 4 years. But...
- historically had relatively old cars when bought, most of the time. Say typically bought at 70-80k miles and dead at 130k miles. Whereas I'm now on a fairly new car (as I can afford it now with daughter flown the coop + mortgage paid off and higher income than ever before). So rather than a 80k mile car lasting 4 years, I've now got a 20k mile car that should last another 8-10 years til it's scrap.
- a couple of those 10 cars were written off c/o someone else hitting me (I do note that could happen any time and everyone is always out of pocket aeach time - my '1 more car' assumes not being accident written off early)
Big IF, but if this car gets me another say 9 years, that'll put me at 66. If i get a new car then, at my Mr-average 12k miles a year, that new car will take me to about 78.
Then I'm assuming at that age I'll probably not be driving due to not being fit to (or dead). Whilst there's some public transport where I am, inc a bus stop across the road from the house, it's not exactly London Underground levels of service.
Though you're maybe right to question whether it's 1 more car or 2 left for me.
some of the pensions die with you as well – your spouse gets nothing
If you are unfortunate to have significant health problems meaning you are not looking at a big number beyond retirement you may be able to transfer out of your final salary scheme into a SIPP before you start taking your pension which can then be passed tax free to your dependants if the worst happens.
So you’re not working past 65 and your folks have already +20 years on that – does this mean you’re somehow expecting your ‘retirement’ car to last +12years and the next one the same length of time or that you live somewhere where a car isn’t really required?
How many cars have you owned in the last 20 years out of interest?
You could easily achieve that.
Seven cars so far at the age of 52. Cars six and seven we still own and the ownership of cars five, six and seven spans the last twenty years.
I'm waiting for a verdict on two local government pension schemes for retirement due to ill health. I've had my initial discussion with occupational health and know they've contacted my GP for reports, but it's been 2 months now since I've heard anything. Anyone else been through this?
If I get a 'no' from them I'll be applying for standard early retirement next year when I'm 55. Though I can't really see how given my GP has even commented on the thickness of my file and number of issues. Been on ESA support group and ADP for 2.5 years now.
Occupational health said if I get the ill health retirement I'll not get all the deductions I'd get with straight early retirement which is obviously great.
I'm certainly lucky that I'm in the railway pension scheme, and it's about as cast iron as it gets. Luckily for us railwaymen and women who were in BR in the early 1990s or before, Bob Maxwell jumped/fell/got pushed off his boat at the right time for us- all the fall out about the Mirror Group pension having been plundered by that ****, meant the railway pension got seperate legislation put in place to protect it when the railways were broken up in 1994. As the BR board was made up if career railwaymen at the time, with a serious stake in that same pension scheme. (Not like today's corporate boards where they don't give a **** about the normal workers and have seperate schemes and huge pay and bonuses in their revolving-door world).
Another question, this one very specific.
On this thread it was pointed out that my Standard Life Stakeholder pension was charging a lot. 0.8% to be precise, but no other fees for changing funds etc.
I have found out I can change to an Active Money Personal Pension (AMPP) or SIPP with Standard life. Both would bring a flat fee around 0.5%, so saving each year.
Both the AMPP and SIPP allow more flexibility, both are cheaper annually by a few hundred quid. I have looked and I could *maybe* save a few pence by moving provider, but that opens up a whole new world of decisions and I believe that Standard Life are a pretty good provider.
Stakeholder: https://www.standardlife.co.uk/pensions/stakeholder-pension
AMPP: https://www.standardlife.co.uk/pensions/personal-pension
SIPP: https://www.standardlife.co.uk/pensions/sipp
I think:
SIPP = more control, more funds and other investment options.
AMPP = likely better for me to chose pre-made funds / simpler selection.
I invest in sustainable & ethical funds and Standard Life have a good few options. I am 17 years from retirement, have a pot of over £100k, salary sacrifice scheme from work, likely to be upping payments in over the next year. Currently enjoying reasonable returns on a slightly riskier than average set of funds, aiming to reduce from that in 7 years and move into more stable funds for the last decade.
What am I missing / problems with switching to an AMPP or SIPP? It seems a win all around.
Should I bother with another provider who could save a few pounds more in fees?
Might be cheaper in fees but are the returns as good? Of course there's a risk / benefit but no sense saving 0.3% in fees if return is 1% lower.
Any set up fees for moving, that you need to factor in?
Another point, having had a prelim appt with an IFA recently (family firm with 5 advisors). Prob not relevant for you yet but may be; your final scheme, the one you finally want to pull your pension from, needs to be flexible enough to accommodate the removal mechanisms you want. Acc to the guy I saw, a lot of co schemes are good for putting into but some lack flexibility for taking out, OK if you just want to buy an annuity or whatever but if you want to take your money out in more esoteric ways, or a mix of ways you need to make sure the scheme allows it otherwise you'll need to move funds again to a scheme that allows the removal you want.
Doesn't help that I have 6 pensions (plus two for my wife, plus the two fully paid state pensions) so him assessing, projecting against retirement needs and desires, and making recommendations for which / where to move them to if there is a need to move isn't going to be cheap - have been quoted £7k but will do an offer for £5k plus a 0.5% annual charge to manage the portfolio annually and recommend moves. That £5k is about 1.25% of my portfolio as a one off, then obv 0.5% going on but their returns are typically about 3% above 'market' on their balanced portfolio so nett should still be more cost effective even with what I'm paying for the advice.
Another question, this one very specific
If you’re talking about a fair chunk of cash then this sounds like the sort of question for an IFA.
Edit - after a bit of playing with excel to get an idea of the likely effect of changing.
By all means use an IFA, but you don’t need one, and IME they’re generally they’re trying to sell you something that they make money on.
I'm pretty confident I don't need an IFA.
No fees to move.
Same funds (and more) on offer if I stay with Standard Life.
I've played with a compound interest calculator - that few hundred quid a year in fees adds up over 17 years, particularly as my pot grows in size and the fee difference becomes larger in cash terms.
^ Conversely, I had a smallish pension doing sweet FA with SJPP, moved it to a smaller IFA and it has seen almost 8% growth in the last 10 months after seeing around 2-3% over the last few years - both pension funds were/are on similar medium/high risk plans. Yes, I know SJPP have a dreadful reputation - life just got in the way of me sorting my shit out.
Eight funds is quite a lot of work I think as each will have its own rules (IANIFA). It's not the £5k but the 0.5% pa thereafter which will likely do the most damage to returns; I would try and just pay the one off fee, but i suspect you will get push back. Or agree to the terms but pull the plug after a year if he hasn't added value and manage it yourself if you are confident enough. Are they all DB schemes..?, you might be able to merge trivial DC pots without IFA interference.
As a slight tangent. What's the consensus on opening Junior SIPP's for my kids (6 & 3) They have some cash in savings and in S&S / Cash ISAs. I'm thinking along the lines of encouraging them to get into savings from a young age, (which I wasn't really encouraged to do).
My retirement plantook me to a cycle ride here. I have less than 14000pa and libe a far more than comfortable lifestyle
Sorry, I feel I've derailed MOAA's question.
By all means use an IFA, but you don’t need one, and IME they’re generally they’re trying to sell you something that they make money on.
It's a bit like my discs and pads thread from a couple of days ago, I probably could do it myself. And i might bugger it up and regret it.
I don't mind them making something from it (0.5% on my current portfolio is about £2000 per year) and if it grows well for another 10 years (to my 65th and tentative retirement plan) could be £4000. So yes, take the average and I could end up paying £3k per year / £30k for the advice but by my illustration, a growth rate of 6% for the next 10 years will give me 1.78x my pot; if they outperform by 2% then that becomes 2.1x and the 30k cost results in about 150k additional return. If they did 3% above (as per current track record) they'd deliver almost 2.4x and 230k extra return. I hope they make a mint out of me because it'll mean I'm doing well too! [In fact I just realised all those deltas in returns are understated, that is the diff on the 400k approx i already have, I'd also do better on the as yet to be paid in of my current scheme, which could be another £100k in. Compound interest, the 8th wonder of the world.]
Eight funds is quite a lot of work I think as each will have its own rules (IANIFA). It’s not the £5k but the 0.5% pa thereafter which will likely do the most damage to returns; I would try and just pay the one off fee, but i suspect you will get push back. Or agree to the terms but pull the plug after a year if he hasn’t added value and manage it yourself if you are confident enough. Are they all DB schemes..?, you might be able to merge trivial DC pots without IFA interference.
My wife's two are both DB, and prob no plans to touch (one is past employer, one's her local authority school CARE one that she's still in)
My 6 are all DC, three small 10k-ish, one medium 65k, one large 300k (spent 18 years there) and then another 50k and growing in my current scheme with good Eer conts that I'd be an idiot to miss out on. So likelihood is that a 5x consolidation of mine and keep the current one going; or may be possible to shovel over most of the existing value from the current but keep it going still and then do the same in another couple of years and then again etc.... but that's the sort of advice I'd be paying 0.5% for, if you don't do anything in the year you paid 0.5% for nothing (rather - to be told to do nothing) but if they suggest moving funds then no costs for the selection and setup, etc.
And also a proper retirement plan, they might tell me on the basis of my lifestyle, and as a lot of my pension would stay invested and growing (unlikely to buy annuity) I might be closer to retirement than I think!!
My retirement plantook me to a cycle ride here. I have less than 14000pa and libe a far more than comfortable lifestyle
And two properties with no dependents nor grandkids etc?
Paying an ifa a lump sum plus ongoing commission is daft. With the access to market nowadays there is enough information and huge array of funds that you could sort out your own future.
Just because they are a qualified ifa does not give them any power of time travel , their guess as to what they think the market will do is as good as yours .
Your mind is telling you they are giving you great information because you are paying for it.
From the above numbers you are in a great place and could probably retire soon, if you can either reduce your hours or do a 3 day week doing low intensity work somewhere else.
Look at AJ bell , Vanguard and Hargreaves Lansdowne. All offer low cost funds , online portals , free transfers.
It's usually a case of opening an account , filling in a transfer in form. This triggers a due diligence transfer out form from your current provider. Fill that in and return it. Then wait for a couple of weeks and it's done.
It's very , very satisfying to amalgamate into 1 provider. Instant fund values with 1 click , less mail , less chance of fraud . It's all there , plus the savings are nicely compounded so more money is left invested.
The only real decision is where to invest within the wrapper . Look at charges , diversity , your own risk aversion, ethical stance. I would probably avoid emerging markets if your in your 50s.
I'm a vanguard fan , not dissimilar amount of cash , approx 300k . It's in 6 funds . Lifestyle 100 , European market, 2 X north American, Japan , Asia exc Japan.
Don't pay an ifa to do this . Waste of money . There's a book called Where are all the investors super yachts. Basic jist is you pay stock brokers , ifas etc alot of money and they are teflon coated . Bad investments mean they keep all the commission and you have lost money with zero comeback , unless they are buying derivatives or other high risk products with your money.
There's a implication that it's a like-for-like comparison, if so it's pretty alarming (and not just for folk retired or just retiring) as the costs are for stuff we all spend on.
According to the researchers, the average pension pot required for a basic standard of living in older age has jumped from £68,300 in 2020-21 to £107,800 in 2023-24.
Not sure about the rest of you but neither my pension pot nor my current earnings have increased anywhere near the same rate.
Averages PA:
Just living £19,300
Moderate £31,300
Comfortable £43,100
So pretty much what a worker needs.
I'm not far off retirement and it dawned on me that unlike in the past when I had considerable work costs, now they're pretty much zero (WFH), therefore my costs during (initial) retirement will stay at the same rate as they are while working - have those who recently retired found this?
It’s a bit like my discs and pads thread from a couple of days ago, I probably could do it myself. And i might bugger it up and regret it.
Except it's not. Investing has never been simpler with access to 'lifestyle' type funds based on a couple of simple questions around age and risk. Yes, you have some degree of complexity in your situation but if I did use an IFA I would be paying them a fixed hourly fee in the same way you do with a solicitor which should cost ~£150/hour.
There's also a ton of good advice on YouTube to get your knowledge up.
I know that's just a clipped quote , but that's meaningless.
Is it per annum? , per person? Overall fund value?
Also it's uncannily close to the average UK single person retirement pot at £107k
Depends on too many variables as well. What your expectations are , your lifestyle , your equity, health , age , family health history .
Yes, I know SJPP have a dreadful reputation – life just got in the way of me sorting my shit out.
- Yes, anyone still with SJPP needs to give their head a wobble.
- Your second point is so true and probably applies to the vast majority of us.
You definitely need alot less if not 'going to work, although mine are minimal as I cycle and try and make sure lunch etc is taken with me - coffee is from the Dolce Gusto, not Starbucks.
Main costs for us are having two adult children at home and things like paying for an extra car, and food - they aren't financially independent yet. Hopefully they will bugger off before I retire.
I was quite surprised at the 'average pension pot' figure. Thats about the amount I've fortunately got in two 'spare' pots I contributed to many years ago. I've 27 years in another couple of schemes which will be my main pension.
It’s very , very satisfying to amalgamate into 1 provider. Instant fund values with 1 click , less mail , less chance of fraud . It’s all there , plus the savings are nicely compounded so more money is left invested.
More chance of losing it all...
their returns are typically about 3% above ‘market’ on their balanced portfolio
On average, nobody can beat the market - the market is the average, after all. With good diversification you can reduce the risk a bit for a given return, but to get 3% extra return the only way is to take on more risk (derivatives, junk bonds, etc.). That's great when things are going well (i.e. the last few years), and arguably good over long periods of time (~15-20 years) when the risk evens out leaving you with only a return. On anything less than 15 years investment horizon I'd suggest that 3% above market is exposing you to a downside that the IFA might not be being clear about. I'd be looking to get some details on the holdings in their balanced portfolio.
My retirement plantook me to a cycle ride here. I have less than 14000pa and libe a far more than comfortable lifestyle
Can you clarify a couple of things. Presumably you are under 65, so this £14k the total of your pension income and the rent from property?
So it will nearly double when you do take your OAP? ( or whatever it is called)
I’m only 38 and started seriously planning a couple of years ago. I’ve always had a pension to pay into, and overpaid into it as much as possible.
Similar.
Curent life is sized to have to mortgage paid off by 50. Plan to retire at 55 latest.
At the moment I'm able to put in £60k annually into the pension. Not quite managing to fill the ISA so I actually might start to reduce some pension to fill ISA. I thought best to 'make hay whilst the sun shines' with the pension tax relief.
I would like to move house somewhere nicer, but that would mean doubling my mortgage so would be a hit to both current standard of living, and also savings and retirement dates. Having a real struggle with myself on this one!
All funds have been rubbish for the last few years , until about last September, when all mine grew 15-20% in the last year, so comparing previous years growth to the last is rather pointless.
FWIW, my workplace pension provider charges platform fees of 0.09%, with total charges last year of 0.23% for my portfolio. My ISA charges zero platform fees. (T212)
To be clear, I've not paid a penny yet. I've been quoted a fee for doing the work suggested, on the basis of a consultation and run through of what i already have. They came recommended to me from a trusted friend and although the fees are eye watering if delivered in a bag as pound notes, small as part of the overall potential value they will bring particularly if they can help me be tax efficient in removal, ensure that I have flexibility in removal, etc. Noted on the market average is the average - that also means some are better and some worse and part of the cost is in outperforming the average. Also noted about taking on less risk as you get closer - all things they spoke about and he compared all their risk profile returns vs market average and their record seems good across all.
For those that have the time and knowledge to do it themselves it might look daft but the way your helpful advice is phrased comes across quite condescending if you don't have the confidence to do it and are worried about bollocksing it up. Might i suggest in the same way as "Your mind is telling you they are giving you great information because you are paying for it", your mind is telling you that your way is the right way because it's what you chose to do and it's working for you, giving you returns you're happy and low / no fees which is great. But thanks for taking the time to give your opinion.
FWIW as well, i don't have to pay an ongoing fee. I can pay for a one off review, recommendation and action and then just leave it. Or go back in 3 years time and ask for a further review.
At the moment I’m able to put in £60k annually into the pension.
Worst arrogabrag Evah !
I've just used a IFA to consolidate and move mine into one place, I just dont have the time to sit and research and do it all myself. According to the numbers it looks like the move should pay for itself in the first 6-9months. If turns out not to be the case I'll bin them off.
52 now so I'm thinking I have 10years to throw as much as possible into pensions/ISAs/etc...
Worst arrogabrag Evah !
Nah, there are worse...
How about " I stopped contributing to my pension fund as I'll still be taxed at the same rate when it come out". Not me BTW 😉
Glad I’m not the only one who rolled their eyes at the 60k a year brag…
It’s a minefield either way - I’ve had 3 different Financial Advisors over the years and looking back don’t think any have been value for money. The problem is until you look into it in some depth it’s really difficult to judge whether their advice is good or whether your investments are performing well. For example my old financial advisor used to justify performance based on it out-performing the FTSE 100 and FTSA all share indexes. Which sounds reasonable until you look into it and realise that he was comparing to limited and relatively poor performing indexes.
I’m happy with the returns so far on a self invested pension. It took a while to sift through options but just sticking to funds and ETFs that performed well over short and long term seems to have worked. I am over-reliant on US stocks and shares though so it may crash hard at some point - looking towards some other regions to diversify a bit - although in truth most world indexes drop if US ones do anyway.
I’m happy with the returns so far on a self invested pension. It took a while to sift through options but just sticking to funds and ETFs that performed well over short and long term seems to have worked. I am over-reliant on US stocks and shares though so it may crash hard at some point – looking towards some other regions to diversify a bit – although in truth most world indexes drop if US ones do anyway.
All stuff that relatively speaking I have no time or expertise to deal with, and "it may crash hard at some point" scares me rigid.
I’ve had 3 different Financial Advisors over the years and looking back don’t think any have been value for money.
Can you expand. Cost you money compared to no advice, break even, or didn't deliver sufficient extra to justify calling it worthwhile
That £5k is about 1.25% of my portfolio as a one off, then obv 0.5% going on but their returns are typically about 3% above ‘market’ on their balanced portfolio so nett should still be more cost effective even with what I’m paying for the advice.
So, in total over ten years they’re going to take ~11.3% of your portfolio even before fund fees are added. That’s a lot for looking at a spreadsheet once or twice a year and recommending either changing what you’re purchasing or some transfers between funds, especially when you buy funds that do it automatically for you for ~5% of your portfolio over 10 years.
What absolute returns are they suggesting you’ll get? ie what are they saying is “market”.
Theotherjonv:
3 advisors all took percentages so in total I was paying well over 2% probably closer to 3% per year. First one sold me a pension from Lincoln National which was terrible and ended up being worthless.
Second one I ended up in a Nucleus Wrap with an active fund manager so agein high fees, performance seemed ok but looking back was no better than following indexes over the same time. Loads of small investments which they tinkered with likely without it benefitting me.
Final one recommended by my father who is still with them and happy, so who knows? But again high charges and I did a direct comparison over 2 years with my workplace pension and Vanguard Isa, it came in last place with highest charges.
Since then self invested pension up 34% in a year and 8 months - so even if it crashed would be doing better than any I have had previously through IFAs - who of course in reality are not independent.
If I was looking at one company then from my experience investing and fund performance, I would seriously consider Royal London - their all-in ‘default’ p Jen funds seem to have very good performance, not sure about charges. The Royal London funds I have within my SIPP have consistently performed very well.
I’d agree that you need to be actively interested to make a SIPP work ideally. With apps very easy to access and manage it doesn’t take much time. But if you’re like my wife and instantly fall asleep when the subject is raised, maybe best avoided!
All stuff that relatively speaking I have no time or expertise to deal with
Its certainly daunting to start with but getting a handle on the basics will really help. A bit of reading a some youtube videos. It can all be done on a phone sat on the bog if you really are that time poor. Its well worth making the time, seems crazy to spend most waking hours working, travelling to work or thinking about work when some good financial planning might mean retiring 5 or 10 years earlier.
This isn't a diss at you btw, loads of people ignore it. I took zero interest in it my younger days. Annoyingly it was when I was employed and had someone else who could've ben chipping in. It only since I went self employed that I've taken proper control and done some decent financial planning. Hopefully enough for early retirement.
All stuff that relatively speaking I have no time or expertise to deal with, and “it may crash hard at some point” scares me rigid.
You've just written the perfect elevator pitch for an IFA. @nickjb above nails it.
So, in total over ten years they’re going to take ~11.3% of your portfolio even before fund fees are added.
You'll have to work that out for me.
1.25% up front (of a portfolio that assuming 6-7% growth will double in ten years without including additional payments in, which will be an estimated £150k plus growth on that) - OK I then miss out on the growth of that 1.25%, so you can say saving that 5k will actually cost me 10k in the end.
And then 0.5% of portfolio for 10 years - assume 400k now and becomes £1m (400 x 7% compounded + £150k extra invested) so midway through = 700k x 0.5 = 3.5k / year = 35k total plus the 10k nett value of the 5k upfront.
45k taken from me and a portfolio worth £1m minus costs - say 950 then...... will cost me 4.7% of my portfolio in the end?
What absolute returns are they suggesting you’ll get? ie what are they saying is “market”.
I haven't got their 7 year and 3 year results sheets with me, but they had a comparison chart. I'll look harder at that. Of course they have a variety of high risk through to low risk mixed funds with different rates, which had a risk profile index on them which they said enables them to match to other products. They can in theory invest in all kinds of pots but in reality he said they track about 150-200 closely and build up some portfolios from them with their own in house managers.
This isn’t a diss at you btw, loads of people ignore it. I took zero interest in it my younger days.
Understood and i do value opinions even if the way they're presented isn't to my taste.... I'm not ignoring it, very keen to do something but I just lack the confidence (rather, having put that much in and have that much potential benefit, don't want to **** it up for the sake of saving a bit that I might be getting back in better returns anyway)
Same position here, prompted by some inheritance and wanting to get a grip on things. I did all the YouTube videos, forums, and spiralled into a mire of confusion and anxiety as it was my future at stake.
I went for a few initial visits with local IFA and went with one that we were comfortable with in the end. Yes, they take a cut or whatever, but the clarity of advice and modelling, taking into account absolutely everything about your finances, your aspirations (and a dose of reality) was worth it for me.
Everyone is different, but I don’t think I’d sleep easy if I’d plumped to try and sort it all out myself, based on YT and forums. Too much at stake IMO. Others may have a different view.
A good IFA could be very helpful for financial planning. The problem, of course is identifying a good IFA. There are still a lot of cowboys out there, and how do you evaluate the quality of the advice you are getting if you're not reasonably clued up on the subject in the first place?
I've had some dealings with my parents' IFAs, and some of their behaviour was definitely shady. However, my folks believed that they had good returns, and wouldn't hear a word said against them.
There are still a lot of cowboys out there, and how do you evaluate the quality of the advice you are getting if you’re not reasonably clued up on the subject in the first place?
Good question. In my case I'm not a total ignoramus, just not overall confident enough / risk vs benefit equation. Even if it chose a bad one, unlikely to be as bad as what i could do if i **** it up.
And second - by taking advice from a friend who is savvy, trustworthy, and who still opted to use (this) IFA for his £1M+ pot (bit older, a lot better paid including a payout when a firm was taken over that he was able to put some hefty sums in)
Good question. In my case I’m not a total ignoramus, just not overall confident enough / risk vs benefit equation. Even if it chose a bad one, unlikely to be as bad as what i could do if i **** it up.
In fairness, there is some research that say that people who use financial planners are, on average, 3% a year better off than those who do not (because of panicking and selling off when the market falls, buying in when it rises, etc). It's perhaps possible that this is where the 3% improvement quoted by your adviser is coming from.
In fairness, there is some research that say that people who use financial planners are, on average, 3% a year better off than those who do not (because of panicking and selling off when the market falls, buying in when it rises, etc). It’s perhaps possible that this is where the 3% improvement quoted by your adviser is coming from.
Interesting stat, do you have a source for that?
You’ll have to work that out for me.
<Ahem> I did get my back of fag packet calculation wrong. However I've now done it on a spread sheet.
Assuming 7% growth in your portfolio of £400,000 and adding £15,000 p.a., calculating yearly.
At the end of ten years your portfolio would be worth £1,001,360.90 without IFA fees.
Using the fee structure that your IFA suggested to you, your portfolio would be worth *£945,275.76
Thats a difference of *£56,085.14 or *5.9% over ten years. In today's money, assuming inflation of 4%, that's still ~ *£38k
That number does vary depending on how well the funds do, and also on how the fees and interest payments and charges etc are structured.
There's nothing wrong with getting financial advice, in fact more people should do so. However you can get very decent financial advice, at varying levels of complexity, for free from the internet, because it is not as complicated as "Independent Financial Advisors" make out.
BTW Financial Advisors who work for a fee rather than a percentage are known as Wealth Managers, and IME you need a portfolio of £1,000,000 + for them to work with you.
*updated figures, spreadsheet error spotted
@dhague also a lot of people either don't rebalance enough, or do it too often.
I wonder if the quoted 3% "over performance" is the difference between a high risk fund (100% equity, maybe tilted towards selected sectors) and a 'typical pension fund' which will be 30%-40% bonds and generally be expected to deliver lower returns. Essentially they'd be charging you £2k per year to put you in something like lifestrategy 100% instead of lifestrategy 60%.
If the idea of your pot losing a lot of value scares you then I'd say you want to be going in the other direction - lowering your risk and consequently also your expected returns. Did they ask you any questions about risk tolerance at all? Recommending high return/risk funds to somebody who has openly told them they don't want to risk big drops in value doesn't sound right to me.
No, as i said further up they have a portfolio of mixed funds from low risk to high risk that they matched against 'market numbers' for the same / similar risk ratings (everyone seems to have a numerical scale, not necessarily the same one, so go 1-7, others 1-5, etc., but from that it'd be relatively easy to index) They then reckon across the board they do better, and on the med risk that they called balanced they were about 2-3% better across the period they analysed. I'll dig the charts out later.
Of course their lowest risk portfolio wasn't 3% better than others lower risk, they probably weren't getting much more than 3% pa on their lowest risk full stop but IIRC they were still better. And the difference between lowest and highest risk over the period was way more than 3%, the highest risk was mid teens IIRC but we've had a pretty good last period and even then it had been up and down like a bride's nightie.
Yes, they did ask about risk tolerance but this was a prelim meeting to see what i had, not a recommendation / setting one. Until they know my retirement aspirations they won't really know what level of risk I might need to take on rather than want to, so that's for another time
Personally, I'd be very wary of any IFA which claimed to be able to outperform the market by 3% unless they are rating your risk tolerance as high (and based on your other comments, you aren't projecting yourself as a high risk taker)
I take stats with a pinch of salt as they tend to only tell you the story they want you to hear and can be read many different ways. For example which fund would you stick your money in
Fund A) suffers huge drops eg lost 35% (covid), lost 20% during 2022 (Ukraine war), produced 0% growth between 2021-23, has 0.75% fee.
Fund B) has grown 15% ytd , delivers 90%+ growth over last 5 years and 230%+ over last 10 years.
Answer………they are the same fund.
There is plenty of info out there that suggests that actively managed portfolios usually perform worse than the market. Based on that, if you’re not into tinkering and risk the best option would be to choose a simple pension plan like Vanguard Target retirement or just research the various packaged pension options, rather then paying an IFA to either just choose one for you or persuade you to go with an actively managed portfolio which will likely perform worse than a passive one.
I have been taken in by this in the past and pretty sure I have lost out as a result.
The advice here is likely to be a don’t do it/do do it back and forth and it’s only really your own mind that can make the call, I’m happy with the IFA, I don’t now sit here thinking, I could have done all that for nowt (and I’m from Yorkshire so tight).
My money did go into Royal London, which you can’t access without an IFA, maybe that’s a sales scam to create a wealth exclusivity feeling, but it seems a good portfolio that reflects my risk attitude and plans.
If you are in doubt whatsoever, I’d find an IFA and take their advice. It’s your money, it’s up to you how you manage it in a way that makes you comfortable.
Royal London funds are available through SIPP platforms, a good percentage of my SIPP is RL funds. I’m not quite sure why you can’t invest in their default pension packages without an IFA.
Weirdly you can get them via a workplace pension scheme if your employer happens to choose them.
Also just a minor point - if there is a major tank in the stock market it, your funds will suffer wherever they are. The only difference I can see is that if you have an IFA they will be ready to persuade you it would have been worse without them…
Also just a minor point – if there is a major tank in the stock market it, your funds will suffer wherever they are.
Indeed.
I also suspect that actively managed funds are more likely to go under than tracker funds as the managers double down on their losses to try and make good.
Indeed.
I also suspect that actively managed funds are more likely to go under than tracker funds as the managers double down on their losses to try and make good.
Do you have any evidence of that happening, or is it just guessing?
Those recommending Vanguard, who I see mentioned a lot. What are your withdrawal options on there rather than the fees and returns?
There is plenty of info out there that suggests that actively managed portfolios usually perform worse than the market.
Any links on that? Would like to discuss with the IFA when deciding whether to pay an ongoing fee or do a single consolidation and plan.
50% of actively managed funds perform below average 😉
As ever it depends where you look. Fund management websites who want you to buy into their service will clearly quote benefits and better returns.
It’s pretty difficult to find genuine articles about it that aren’t themselves from sites that have a conflict interest in you buying their services like Morningstar or others. Here’s an article from the Independent which provides an overview:
https://www.independent.co.uk/money/spend-save/an-active-or-passive-fund-it-all-depends-on-the-type-of-investor-2082590.html
Similar one from Trustnet which suggests a blend of active and passive:
https://www.trustnet.com/news/351804/active-versus-passive-finding-the-right-approach-for-you
This is effectively what I ended up with with a self-invested SIPP - a combination of passive and active funds.
Over a 20-year period, 95% of large-cap actively managed funds have underperformed their benchmark.
https://advisor.visualcapitalist.com/success-rate-of-actively-managed-funds/
Re Vanguard, withdrawal all the usual options ie 25% up front, gradual drawdown etc. Flexible drawdown I think is the preferred option - this automatically keeps the maximum amount invested and allows you to take 25% of each withdrawal tax free whilst leaving the rest invested.
Do you have any evidence of that happening, or is it just guessing?
Just guessing. Whenever you hear of a fund that collapses it seems to be actively managed.
You definitely need alot less if not ‘going to work, although mine are minimal as I cycle and try and make sure lunch etc is taken with me – coffee is from the Dolce Gusto, not Starbucks.
Main costs for us are having two adult children at home and things like paying for an extra car, and food – they aren’t financially independent yet. Hopefully they will bugger off before I retire.
So you too have little in work costs.
These "adult kids", are they not contributing - because if they aren't and they're still there when you retire your costs won't change on retirement.
And why an "extra car" if you cycle to work - surely this means that when you retire you'll be keeping this "extra car" and the associated costs?
The above is the gist of my realisation, my OH retired early in the Spring and I'm looking at going once they've wound up the company I work for (sometime next year), I can't see our costs changing one iota - well not without stopping doing something we enjoy and/or skimping. It's not such an issue for us (both worked in well-paid jobs most our lives, both have DB & DC pensions and own property etc) but it's more that we'll need to work out how to 'front-load' drawdown to ensure we can properly finance retirement (based on seeing how costs do tumble as our parents aged once in their late 70's etc and our State Pensions will kick in at 67).
Those who have retired, what did YOU save on vs working in your last few years, so once the associated costs due to kids etc had disappeared?
Any links on that? Would like to discuss with the IFA when deciding whether to pay an ongoing fee or do a single consolidation and plan.
It was a few years ago, when I had a similar conversation with an IFA that made me realise that their advice generally isn’t worth much.
The finance industry is notoriously opaque when it comes to releasing the data on active funds. Much like big pharma, they only release the data that paints them in a flattering light, ie out perform the market. The ones that don’t never see the light of day.
Warren Buffet, famously, is an advocate for passive investing, and (I think) bet $1,000,000 each with three very successful active fund managers that they couldn’t outperform an index. He won.
My problem with IFAs is that they have a vested interest in promoting active funds, because often they get commission, but apart from that, if they don’t promote active funds there’s not really much else for them to justify the outrageous fees they charge.
That’s because once you decide on passive funds, investing actually gets really boring. You either decide on a managed fund (lifestyle funds etc) and pay a little more in fees for them to rebalance for you, or you decide for yourself on your allocation strategy, buy a mix of trackers and then rebalance according to your strategy.
Anyway when I started questioning the IFA on active vs passive funds and about where his commission would come from, he got quite tetchy and basically said that if I knew so much about passive funds, why was I wasting my (his!) time talking to him. I now agree.
Main costs for us are having two adult children at home and things like paying for an extra car, and food – they aren’t financially independent yet. Hopefully they will bugger off before I retire.
This is difficult and I relate.
I've one starting uni on Monday, I'm having to support him for the next four years. But he still has to work himself and he doesn't get a car or anything daft like that.
One of the others at home now contributes a reasonable rent and board to us. We then save half that into a good savings account, which he triples into a LISA and another savings. So there's a modest cost to him being here, but there pay off is he has enough deposit saved since pandemic to buy his own place....
Last one has properly left, and our only financial ties was a modest loan last month to help buy a van and insurance to start work/commute.
I've always been a bit of a 'get a job, pay your way, be responsible, by the way we're here as backup'. It's hard when they are adults, but they have to step up.
I apologised if I missed something as I haven’t read all the detail, but TOJV; why aren’t you banging it into a Vanguard SIPP, which kind of feels easiest and cheapest in balance?
I’m just about to add my prior work pension to my Vanguard pot.
Also, a question from me (10yrs from retirement) - I have a Hargreaves’s Landown SIPP also which has higher fees than Vanguard although the funds performed well on the Bailee Gifford managed fund, would be cheaper inside Vanguard - any qualms about all your eggs in one basket?