What would you do with a £1million pension?
Discussion
Ginge R said:
You stated you would be "very surprised if a final salary scheme didn't use some sort of inflation measure for revaluation and escalation of benefits". There is such a measure, it's obligatory and forms part of a TVAS (the information for which is approved by the scheme trustees and provided by the scheme administrators).
You suggested you had just done a transfer, but "never been involved in TVAS". I suggested it must have been someone at their scheme normal retirement age (NRA) transferring and crystaliding benefits. As you'll know, a transfer report taking into account all incremental rises is obligatory, unless as written above, the transfer relates to a member crystallising benefits at scheme NRA.
I said that I would be "very surprised if a final salary scheme didn't use some sort of inflation measure for revaluation and escalation of benefits".You suggested you had just done a transfer, but "never been involved in TVAS". I suggested it must have been someone at their scheme normal retirement age (NRA) transferring and crystaliding benefits. As you'll know, a transfer report taking into account all incremental rises is obligatory, unless as written above, the transfer relates to a member crystallising benefits at scheme NRA.
You seem to be suggesting that for TVAS any incremental rises must be allowed for. This doesn't suggest that my statement above is correct or incorrect, just that inflationary increases should be allowed for where appropriate. I don't understand the connection here at all.
I meant to say that I have not had any experience in producing TVAS, I only have experience of TVAS from a client's perspective.
BanzaiMan said:
jon- said:
I don't know much about, well, anything, but I do know St James Place fees are expensive.
Relative to what?I'm not affiliated with them in any way nor am I a customer but I think they get a very unfair schtick on here indeed.
To be fair, someone 'researching' such things might read the comments in an article like this....
https://www.ftadviser.com/2016/07/29/ifa-industry/...
....and conclude they were a bit marmite to say the least, no?
https://www.ftadviser.com/2016/07/29/ifa-industry/...
....and conclude they were a bit marmite to say the least, no?
Leaving aside the wisdom of transferring, £1m really doesn't mean what some are suggesting it does. Once you knock off expected inflation from expected returns, leave a margin for safety, and want it to last through to a ripe old age then it's not going to get you anything near £50k a year.
Given that I'm someone who likes cars, and given that I'll likely want to travel a bit, and in decent style, I'd be aiming for twice that.
Given that I'm someone who likes cars, and given that I'll likely want to travel a bit, and in decent style, I'd be aiming for twice that.
James_B said:
Leaving aside the wisdom of transferring, £1m really doesn't mean what some are suggesting it does. Once you knock off expected inflation from expected returns, leave a margin for safety, and want it to last through to a ripe old age then it's not going to get you anything near £50k a year.
Given that I'm someone who likes cars, and given that I'll likely want to travel a bit, and in decent style, I'd be aiming for twice that.
Gross or nett ?Given that I'm someone who likes cars, and given that I'll likely want to travel a bit, and in decent style, I'd be aiming for twice that.
Hainey said:
BanzaiMan said:
jon- said:
I don't know much about, well, anything, but I do know St James Place fees are expensive.
Relative to what?I'm not affiliated with them in any way nor am I a customer but I think they get a very unfair schtick on here indeed.
1) SJP - They would make Jesse James be ashamed to be called a cowboy. Their charges are opaque to disguise how high they are. They do not offer any "investment guarantee". They offer an "advice guarantee" . Which is basically just marketing (which they do excel at). If anyone one receives advice from any adviser which is incorrect and results in financial disadvantage, then they are entitled to make a claim for compensation. If the Company refuses compensation, then the FCA will rule on it. So SJP clients have no better protection than anyone else. They do get very expensive brochures however, and get taken out for the day to Henley or the Test Match if they earn the adviser enough commission, Sorry, I meant to say "fees". Of course. Finally, they only offer restricted advice of course, they are not IFAs.
2) Yes a report on the potential transfer by an IFA is compulsory. Yes, that will need to include a TVAS, which on it's own will cost over £500. A 1% fee however, working out at 10K, is seriously taking the piss. For instance, I paid a total of £1000 all in for a similar report last year.OK, I called in some favours, but even 2K would be steep.The report will almost certainly recommend that the client does not transfer out. This is because of the guarantees, spouses pension, escalation etc provided by the DB scheme.
3) Does this mean he shouldn't transfer out to a SIPP?
Well, it's not as clear cut as the advice that the IFA has to give. If he is single, and not concerned about spouse or inheritance, then the SIPP option becomes much more attractive.
4) Figures- well, firstly a £1M pot would provide a tax free lump sum of £250K, not £200K. Secondly the income drawndown after that is subject to normal income tax rules, so 55% is garbage. (Perhaps someone is getting confused with taking the whole pot as a lump sum) .
With 750K left to provide income, taking a net annual income of £39000 (which would have been subject to just 20% tax) every year, assuming he started at age 65, at age 86 he would still have £412K left in the pot, assuming he achieved a net investment return of just 4% per annum.
To me, it would be a no brainer to transfer out to a SIPP. Which Is why I have done exactly that.
5) Can he transfer out ? Yes, it's possible, but not easy. Many IFAs will refuse to touch it. Self transferring and investing however gives more options. If you know what you are doing.
Edited by Tit For Tat on Saturday 8th July 17:20
James_B said:
Gross would be fine, especially as I'll not be paying anything like the rate of tax then, I hope, but I'm not planning on retiring if and when I get there. If I hit it while still enjoying work then I'll probably keep working.
Sorry to break this to you, but if you take £100K gross income from your pension, you will be taxed at 40% on it. And if Labour get in, then God help you.Tit For Tat said:
James_B said:
Gross would be fine, especially as I'll not be paying anything like the rate of tax then, I hope, but I'm not planning on retiring if and when I get there. If I hit it while still enjoying work then I'll probably keep working.
Sorry to break this to you, but if you take £100K gross income from your pension, you will be taxed at 40% on it. And if Labour get in, then God help you.Depending on whether or not you were still eligible for NI you'd be looking at £65.5 - £71k +/- pa
Living a decent London Life? Running some good cars ? Travelling extensively and in some style? All this on £65 - £70kpa?
Hmmm.
BanzaiMan said:
Relative to what?
Relative to the competition. Post RDR, advisers are supposed to charge a fee for advice, not receive commission from products. The way that SJP structure their charges however baffles a lot of actuaries. It makes direct comparison with anyone else difficult, but to simplify it you will pay circa 5% of the amount you invest with them. so a 100K investment will cost you 5K. A normal fee charging IFA would charge you (depending on the complexity required) perhaps 1-3K.Hainey said:
Exactly. You pay for the investment guarantee they give and a very high level of service. Whuch overall isnt expensive at all relative to what you recieve.
I'm not affiliated with them in any way nor am I a customer but I think they get a very unfair schtick on here indeed.
What investment guarantee do they give?!!I'm not affiliated with them in any way nor am I a customer but I think they get a very unfair schtick on here indeed.
Tit For Tat said:
Relative to the competition. Post RDR, advisers are supposed to charge a fee for advice, not receive commission from products. The way that SJP structure their charges however baffles a lot of actuaries. It makes direct comparison with anyone else difficult, but to simplify it you will pay circa 5% of the amount you invest with them. so a 100K investment will cost you 5K. A normal fee charging IFA would charge you (depending on the complexity required) perhaps 1-3K.
Shouldn't be too hard for a decent actuary to make a pretty good ballpark comparison of the costs for different structures!sidicks said:
Shouldn't be too hard for a decent actuary to make a pretty good ballpark comparison of the costs for different structures!
OK to be fair they have of course, but I have personally spoken to one who told me it was the most complicated charging structure he had worked on. He did try and explain his calculations to me, but he lost me pretty early on.The "5% rule" is however close enough to use as a calculation.
Tit For Tat said:
BanzaiMan said:
Relative to what?
Relative to the competition. Post RDR, advisers are supposed to charge a fee for advice, not receive commission from products. The way that SJP structure their charges however baffles a lot of actuaries. It makes direct comparison with anyone else difficult, but to simplify it you will pay circa 5% of the amount you invest with them. so a 100K investment will cost you 5K. A normal fee charging IFA would charge you (depending on the complexity required) perhaps 1-3K.I understood that the majority of IFAs were still operating on a % based model, so don't see how that differs
I'd be very surprised if an actuary struggled - surely it can't be that difficult?
You sure the 5% is for all investments, I understood it was only unit trusts?
Does the IFA % figure include platform costs etc?
Initial costs are part of the picture, but what about ongoing costs (advice, platform, fund and DFM (or do IFAs tend to run the investment themselves?)?
Would be good to have a side by side comparison for total costs over (say) a 10 year period
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