Trouble with IFA’s is a lot of them I have looked at now want to charge £60 per hour for advice after the first hour, and then take 3% instantly to actually take on management of your portfolio, plus annual management % on top. The consultancy fee I can just about live with. Annual management is OK, although I think it should be % of profits as at the moment it seems to be win/win even if they give you bad advice. The instant % just seems like a con if you have already built up a fund. They should be working hard to make their % on profits they make for you in the future, not acquire a generous slice of what you already have and guaranteed annual income on top. Plus the more wealth they manage, the more creditable and profitable they can become, so it should be in their interests to deal with you. This is why it is hard for me to view them as anything other than a bunch of bottom feeders.
Looking at my very small NEST ‘high-risk’ pension fund which I have from a few PAYE agency contracting jobs, the fund consists of about 3% each of Apple. Microsoft, Alphabet (Google), Tesla, etc. Didn’t exactly take a genius to throw that spread together but they still take an impressive management charge despite performing pretty much the same as a lot of their supposedly safer funds and well below the sharia fund.
I’ve spent a lot of the lockdown year trying to work this out and basically I have calculated scenarios based on retiring at 61, 62 or 63 (I’m 59 this year). I think we are in broadly similar positions in the respect that we have pensions in the HE sector. The good thing about that is that you can say with a strong degree of confidence how much your cash lump sum will be and how much your yearly pension will be. I am in USS and they have a website where you can try out the different scenarios (retiring at 61, 62, 63, taking more cash or more pension etc). So therefore if you can calculate your starting value (your lump sum) and your yearly income (your annual pension) the one bit that is missing is your outgoings and to be honest this is the thing, to a large degree, that will determine when you will retire. Or to put it another way; what kind of lifestyle do you want in retirement?
I have spent a lot of time looking at this. You need to be honest about how much you currently spend and on what you spend it. I have worked out how much a year I am going to spend and (excluding mortgage payments) it comes out to £31K per year. So what does £31K get you? It gets you
a reasonable car (assume £400 per month payments)
£5Ks worth of holidays (perhaps skiing and a summer holiday)
The rest is just living and for me that would include a few UK races and perhaps a long weekend or two in Berlin, to see my sister in law.
You don’t need a Financial advisor to work out any of the above and your suggestion of drawing down against your pot seems a sensible one. A financial advisor might help on perhaps matters of tax and legislation. It might well be worth paying for an hour or so of their time to advise in this area. But in no way would I let them anywhere near your tax free lump sum nor your annual pension.
Not sure whether I am really answering your question or not. Hope that this is useful in some way. Happy to expand on any of the points above
I think it’s a requirement now that you have to have spoken to a financial advisor before you draw or transfer your pension. It’s supposed to stop people making stupid decisions or being lead astray by con artists.
For defined contribution schemes, the normal advice as you approach your planned retirement date (<5 years?) is to switch your investments into lower growth, safer products like government bonds. That way, if there’s another pandemic or something similar and stock markets crash you don’t lose all of your retirement savings just before you want to take them.
That’s how our University pension works. You have a target retirement age (TRA). Once you get within 10 years of that date they gradually move your investments into lower risk stocks (you can choose to override this).
Not heard about the requirement to speak to a Financial Advisor before. I think the Uni has a pensions staff who can provide information over options but will stop short of saying do option A over option B.
you are advised to talk to an advisor but you don’t need to. I’ve done 2 private pension drawdowns and took the tax free option and had the rest invested elsewhere.
I’m a trustee of our company defined benefit scheme (but joined too late to be a member ) and I know our scheme administrators require members to have independent financial advice before they’ll allow a transfer out of the scheme, just to make sure that people aren’t being robbed.
When the government introduced “pension freedom” for defined contribution schemes they introduced free financial advice for anyone approaching retirement -
to an extent I agree. but I also guess it depends on how complex your situation is - an IFA can help sort the chaff out and help an understanding of options available. that’s why we still use an IFA and have an annual meeting to discuss our position and the way forward. however, I think in a few years time once we have unravelled a couple of companies we still own and get income from, we won’t need the advice we get and can go our own way. we’ve already started the process in a few investments.
Plan B
Buy another house for rental … the market is all over the shop at the min, but this could well turn out to be plan A if the financial winds blow in the right direction.
Plan C
Go to 60 we’re the final lump sum pay out is quite a bit more. Plan C seems a long way off… today Plan D sounds more appealing.
Plan D
Bench in the park, strong lager and stray dog on the piece of string.
I thought Zwift was free? I must have been told 354456645 times you should be on Zwift but it just doesn’t appeal, I’m determined to ride outside more this year… once it stops raining/ being cold.
Zwift has offered an option from the bad weather and is good training, but I get what you mean. I’d much prefer training outside if I hadn’t become such a wimp
I’ve really enjoyed running outside the last month or so, with no treadmills available, Work or gym it’s a case of have at it what ever the weather.
Yesterday’s run was my best for some time in atrocious conditions chasing some one 14 years younger… has to make you faster… right ?!
Cycling, not so much, seen two good friends get in really good shape over the winter months and fall off big style in feb on ice, both broke bones, one very badly.
Our pension scheme changes dramatically over the next 18 months, a lot will depend on the outcome of this.
Hope the pension scheme changes go well, although that’s rare these days, I’m hoping I just miss any state changes, or they only add a month or so on.
I’d normally prefer running outside like you, no matter the weather really, but apart from not actually running ATM and I wouldn’t want to slip and make it worse.
I had a bike fall about 8 years ago, 1mph on black ice going round a corner, medial knee ligament strain, cost me 8 weeks of training and any attempt at a decent London Marathon that year so don’t take the risk these days.
Our union chairman is a mate, helping him with his boxing skills when the world gets back to normal, seems to think it will benefit
“ the old dinosaurs “ so that’s all good.
Hope the injury mends and you can get out in the wilds are you live in some better weather
@Sparky thanks for that reply, very helpful. Looks like we’ve been doing the same thing, although I’m about 8 years behind you but got a similar conclusion. Like you the LGPS has various calculators and you can see what you’ve had in recent years and a forecast. Also found other things about how to calculate your allowance etc., and in 7 years I should also have the full state pension.
I know I don’t need the final forecast, and as above my APC & AVC will hopefully mean I can finish in 7-8 years depending on how things pan out. Then use the AVC to bridge to the state pension.
I saw a few suggestions about how much you need, and a current equivalent of about £30-31K like you’ve mentioned was about what I came to. I’m less bothered about a car but would have the option. But I do like travelling and holidays. I’d also have a bit left in the lump\savings\AVC if necessary and as I get older I’d probably do less races like Ironman as it will be harder to recover from them.
Also with no kids I might as well spend the money on myself, the GF will have enough, otherwise it will be my nephews that get it! Although I’m saving more with not being able to do anything ATM!
In the meantime I need to keep working for at least 5 years and see how the forecasts are going.
You’ve at least confirmed I’m probably on the right track
Hmm, yesterday’s double session of a fairly hard crit race followed later by 90 minutes at 245W (~70.3) pace was a good reminder that I’m not as young as I was
Been pretty tired today despite a decent sleep. Although I actually felt alright yesterday while I was doing them.
) and I know our scheme administrators require members to have independent financial advice before they’ll allow a transfer out of the scheme, just to make sure that people aren’t being robbed.
