Pension Advice - Fund Manager or SIPP
Discussion
JulianPH said:
You are, of course, 100% correct. Unfortunately the Financial Conduct Authority decided (with their infinite wisdom) that you want really want is a breakdown of each and every fee element (advice fees/platform fees/dealing fees/custody fees/investment management fees/ additional investment management expenses/SIPP fees/etc.) rather than a price for the whole service/product.
Remember, they know what is better for you than anyone else...
So the industry is now forced to price this way. Of course there is nothing stopping the industry adding all of this up and giving you the total, but that would generally show how sodding expensive it all is!
It is like M&S having to give you a breakdown of every element of costs when you hand the jumper/sandwich/whatever over at the till. You (and I, and everyone else) don't care!
Tip - the best value always comes from providers/advisers that give the the complete cost. They often look more expensive than those that quote only their own headline fees (such as Hargreaves Lansdown) and omit all other costs, but when you look into things in more detail you see these are actually the best value (unfortunately most people don't look past the headline rate though).
Thank you, much more eloquently put then I but it's nail on head. I can fully understand the thinking behind why the FCA might want total opacity as far too much of the financial sector seems a bit smoke and mirrors to a lot of people but I'm not sure the solution they've come up with is any better. We've gone from total obfuscation to information overload. Remember, they know what is better for you than anyone else...
So the industry is now forced to price this way. Of course there is nothing stopping the industry adding all of this up and giving you the total, but that would generally show how sodding expensive it all is!
It is like M&S having to give you a breakdown of every element of costs when you hand the jumper/sandwich/whatever over at the till. You (and I, and everyone else) don't care!
Tip - the best value always comes from providers/advisers that give the the complete cost. They often look more expensive than those that quote only their own headline fees (such as Hargreaves Lansdown) and omit all other costs, but when you look into things in more detail you see these are actually the best value (unfortunately most people don't look past the headline rate though).
Let's just say I've learnt more about investing and pensions in the last 2 days then I ever thought I'd want to know. Mildly interesting and I always like to know at least a little bit about something before sticking my hard earned in it but I could have spent that time doing something a bit more productive in line with my real work.
Guvernator said:
Thank you, much more eloquently put then I but it's nail on head. I can fully understand the thinking behind why the FCA might want total opacity as far too much of the financial sector seems a bit smoke and mirrors to a lot of people but I'm not sure the solution they've come up with is any better. We've gone from total obfuscation to information overload.
Let's just say I've learnt more about investing and pensions in the last 2 days then I ever thought I'd want to know. Mildly interesting and I always like to know at least a little bit about something before sticking my hard earned in it but I could have spent that time doing something a bit more productive in line with my real work.
No problem mate, I am not a financial adviser but if I can be of any further help to a fellow PHer just PM me, I'm more than happy to assist. Cheers, JulianLet's just say I've learnt more about investing and pensions in the last 2 days then I ever thought I'd want to know. Mildly interesting and I always like to know at least a little bit about something before sticking my hard earned in it but I could have spent that time doing something a bit more productive in line with my real work.
I'm not being obtuse, I didn't run you through any rate. I referred to the principle, which differs for absolutely every client. If you don't understand the principle, Abraham's piece may interest you. SWR sits behind, unseen, and underpins nearly all decumulation advice for clients who embrace a strategy based around income in retirement.
http://citywire.co.uk/new-model-adviser/news/the-g...
http://citywire.co.uk/new-model-adviser/news/the-g...
I believe that Ginge R (Al) is saying a 'safe' withdrawal amount is whatever the fund achieved in the previous year minus inflation (so the fund is not depleted). That is how I rate it, regardless of the percentage. Intelligent Money has delivered c. 5%-6% per annum over the last 10 years, Parmenion is probably similar or close. Al can give you that information.
The one I did last night comes in quite a bit lower than that (c.3.75%), it's a reflection of the client, not just the funds. I do them over longer blocks, the first few years of retirement (1-5) are vital - get those right and you're in with a much better chance of succeeding in the long term. It's a military couple, so they think well, in terms of strategy and tactics.
JulianPH said:
Yet one may also try and help here, why don't you give it a go... 
Oh I am, but indirectly. I also agree with your concept that "a 'safe' withdrawal amount is whatever the fund achieved in the previous year minus inflation (so the fund is not depleted)".As for pensions, if standard rate taxpayer, don't invest in political footballs. If a higher rate taxpayer, get one.
Edited by Simpo Two on Wednesday 4th May 21:40
Simpo Two said:
As for pensions,
If a higher rate taxpayer, get one.
Totally agree.If a higher rate taxpayer, get one.
Simpo Two said:
If standard rate taxpayer, don't invest in political footballs.
Hmmm. People ought to save for the future in some way or other. I guess that with the various ISA and lifetime ISA changes there are some viable alternatives to conventional pension.And I would always suggest that if your employer is willing to contribute to a pension, make sure you pocket the "free extra pay"!
Like all things, there's no right or wrong answer. As much as anything, that's going to depend on the level of tax you pay - not just now - but also in retirement. To cast pensions as pointless because they're political footballs or the like, is probably too dogmatic. We all know the traditional pension wrapper is under attack, but not only because they're 'footballs'. Government has a duty to operate responsible policy and if we're all living longer, that policy has to be sustainable.
So, moving away from that well worn path, most people will still gain the most from pensions, but only if their personal tax rate is going to be lower in retirement than in their working life. A 40% taxpayer pre retirement, will be in a better position if he/she remains low (or better, sub personal allowance), when in drawdown. The value falls if you remain 40% or more in retirement.
The Lifetime ISA is beating a path for the new US style 401K style of retirement account. If earnings in life remain 20%, and continue at that rate in retirement, then the Lifetime ISA becomes, and remains, more advantageous – the 25% uplift easily spanking the pension wrapper.
The financial benefits of each wrapper will depend on the current rules and rates remaining the same until we all retire, which experience tells us will not happen. The pension wrapper is as much of a football as any other financial planning policy dictated by the Chancellor - you look at it and consider it based on your own personal circumstances, taking into account that a pension is not just a whole of life product anymore - it's also a highly relevant estate planning tool.
Change isn't bad, it just means you have to adapt. Baby boomers benefited hugely from the quick and broad reaching change in the seventies and eighties, that some decry now, in the noughties and teenies. It's time, long overdue in my opinion, to consider those who are expected to shoulder the ongoing burden and to sustain that change - to their own personal and societal detriment.
So, moving away from that well worn path, most people will still gain the most from pensions, but only if their personal tax rate is going to be lower in retirement than in their working life. A 40% taxpayer pre retirement, will be in a better position if he/she remains low (or better, sub personal allowance), when in drawdown. The value falls if you remain 40% or more in retirement.
The Lifetime ISA is beating a path for the new US style 401K style of retirement account. If earnings in life remain 20%, and continue at that rate in retirement, then the Lifetime ISA becomes, and remains, more advantageous – the 25% uplift easily spanking the pension wrapper.
The financial benefits of each wrapper will depend on the current rules and rates remaining the same until we all retire, which experience tells us will not happen. The pension wrapper is as much of a football as any other financial planning policy dictated by the Chancellor - you look at it and consider it based on your own personal circumstances, taking into account that a pension is not just a whole of life product anymore - it's also a highly relevant estate planning tool.
Change isn't bad, it just means you have to adapt. Baby boomers benefited hugely from the quick and broad reaching change in the seventies and eighties, that some decry now, in the noughties and teenies. It's time, long overdue in my opinion, to consider those who are expected to shoulder the ongoing burden and to sustain that change - to their own personal and societal detriment.
Some interesting points raised fella's. Firstly I'm over 40 so don't qualify for a lifetime ISA so unfortunately that's off the cards. I am aware I need to make provision for my retirement if I don't want to be destitute, however as others have stated I've never been completely comfortable with pensions due to the "political football" nature of it. My answer to this is that I won't put all my eggs in one basket and the pension will only one part of my retirement planning.
I own a Ltd company so there are some big tax advantages to having a pension through the company, this more than anything has led me to start looking at them. If I was paying for it privately I probably wouldn't bother at all.
Speaking of political footballs, many of the advisor's I spoke to wanted to include the state pension into their calculations, probably because it's an easy way to make the figures look better. I pretty much sacked those advisors off straight away as I suspect by the time I get to retirement age there will either be no state pension or the age at which you get it will be so high that it will be an irrelevance anyway. If I as a layman know this then I'd expect a pension advisor to know this too and not try to massage the figures by adding the state pension into the equation.
I own a Ltd company so there are some big tax advantages to having a pension through the company, this more than anything has led me to start looking at them. If I was paying for it privately I probably wouldn't bother at all.
Speaking of political footballs, many of the advisor's I spoke to wanted to include the state pension into their calculations, probably because it's an easy way to make the figures look better. I pretty much sacked those advisors off straight away as I suspect by the time I get to retirement age there will either be no state pension or the age at which you get it will be so high that it will be an irrelevance anyway. If I as a layman know this then I'd expect a pension advisor to know this too and not try to massage the figures by adding the state pension into the equation.
Jockman said:
The state pension is taxable just like your other pensions and it may tip you over into a higher bracket.
It can also affect the offerings of pension companies when they set out your options in due course.
That's assuming you'll get one. Given the current mess the UK pensions pot is in not the mention the countries finances overall, I can't help but think by the time I retire, state pension age will be 75+ and mostly irrelevant to me as I'll probably be dead by then.It can also affect the offerings of pension companies when they set out your options in due course.
Guvernator said:
Jockman said:
The state pension is taxable just like your other pensions and it may tip you over into a higher bracket.
It can also affect the offerings of pension companies when they set out your options in due course.
That's assuming you'll get one. Given the current mess the UK pensions pot is in not the mention the countries finances overall, I can't help but think by the time I retire, state pension age will be 75+ and mostly irrelevant to me as I'll probably be dead by then.It can also affect the offerings of pension companies when they set out your options in due course.
Get your forecast - £155 per week seems ok. Especially if you've never paid any NI.https://www.tax.service.gov.uk/checkmystatepension
You should know your state pension age by now.
Jockman said:
Stay positive Get your forecast - £155 per week seems ok. Especially if you've never paid any NI.
https://www.tax.service.gov.uk/checkmystatepension
You should know your state pension age by now.
I've paid plenty of NI and yes my retirement age is supposed to be 67 but I'm not convinced the goalposts won't be moved many many times by the time I get to that age due to the massive pension hole we are in i.e. there's no guarantee it will stay at 67. Get your forecast - £155 per week seems ok. Especially if you've never paid any NI.https://www.tax.service.gov.uk/checkmystatepension
You should know your state pension age by now.
Gassing Station | Finance | Top of Page | What's New | My Stuff