[Misc] Retirement

[Eric the meek]

Not sure I agree…….but if anyone has sufficient time, knowledge and experience to confidently manage everything then fair enough. Personally, I need help and I don’t mind either admitting it or paying for it, as a mistake could be hugely expensive (and I worked in banking for 36 years, and regulatory compliance for the last 20 or so). Also, if you want to cash in a DB pension you absolutely do have to have an IFA. If you don’t understand investing, how do you securely and safely diversify ? How do assess risk ?

-my SIPP is managed independently
-I have two other DC pots that remain with my employer’s schemes, but where I can choose the investments (within reason). These are low cost
-I manage our ISAs and other savings……mostly successfully but naturally including a few punts that haven’t been so good

Issues for me, and where an IFA has been helpful, include :

-how to manage a range of pension pots with differing rules and restrictions to ensure an overall balance of risk and reward
-how to maximise income and growth from those pensions relative to expected drawdown timing and amounts
-how to manage drawdown from my various sources to maximise tax efficiency
-how to structure things from an IHT perspective
-how to manage pension pots to limit the effect of the lifetime allowance
-how to write wills to minimise tax liability and protect certain dependents

It’s ****ing complicated !

Some good points.

A mistake could still be hugely expensive, even if an IFA makes it. IFAs are expensive anyway, and don't offer performance guarantees.

I agree that you do need an IFA if you want to cash in a DB pension, but the trouble is, no IFA my wife and tried, would touch her DB pension, due to the possible comeback. This was even with us offering to sign something to the effect that there would be no comeback! In the end, we gave up trying.

I manage my own SIPP, ISAs, fund and share accounts, those of my wife, and also my son's ISAs. As you would expect, I've made some mistakes, but overall, I'm well up. I worked in contract IT testing at the sharp end of wholesale and investment banking, pension providers and administrators as well as luminaries such as Northern Rock and Equitable Life. I've seen the dirty laundry!

My SIPP is held with Hargreaves Lansdown. Diversification is easy with their portfolio analysis tool, which slices and dices your investments by asset type, region, country, industry, sector, market cap, currency, you name it. It's a brilliant tool. As an investor, all the risk measures - global, country, sector, market, currency etc, are mitigated by the analysis tool. For instance, I know I'm invested in over 60 countries. The proof of the pudding is when you check the day gain/loss of your investments, and some have risen and some fallen. That's what you want.

I'm sorry I came across a bit negative about IFAs. That comes from experience. I haven't come across a good one.

 

[£1.99]

and there’s the big dilemma, finding a GOOD IFA, who you can trust. Always remember back in the 80’s financial melt downs public notices in the Arsegas had FA’s in significant numbers going bust personally! If they couldn’t look after their own finances they darn sure weren’t best positioned to look after other peoples.

Do your research, ask other people who they use, are they satisfied with what they do for them, and are the financial results satisfactory. Don’t just take the first one mentioned to you….

Thank you. Good advice

 

[dazzer6666]

Some good points.

A mistake could still be hugely expensive, even if an IFA makes it. IFAs are expensive anyway, and don't offer performance guarantees.

I agree that you do need an IFA if you want to cash in a DB pension, but the trouble is, no IFA my wife and tried, would touch her DB pension, due to the possible comeback. This was even with us offering to sign something to the effect that there would be no comeback! In the end, we gave up trying.

I manage my own SIPP, ISAs, fund and share accounts, those of my wife, and also my son's ISAs. As you would expect, I've made some mistakes, but overall, I'm well up. I worked in contract IT testing at the sharp end of wholesale and investment banking, pension providers and administrators as well as luminaries such as Northern Rock and Equitable Life. I've seen the dirty laundry!

My SIPP is held with Hargreaves Lansdown. Diversification is easy with their portfolio analysis tool, which slices and dices your investments by asset type, region, country, industry, sector, market cap, currency, you name it. It's a brilliant tool. As an investor, all the risk measures - global, country, sector, market, currency etc, are mitigated by the analysis tool. For instance, I know I'm invested in over 60 countries. The proof of the pudding is when you check the day gain/loss of your investments, and some have risen and some fallen. That's what you want.

I'm sorry I came across a bit negative about IFAs. That comes from experience. I haven't come across a good one.

At least if an IFA makes a mistake you have a mechanism of complaint and recompense though. Re pensions, unfortunately the FCA and TPR both hate DB pension exits so they’ve made the regulatory aspects so difficult most advisers have stopped doing it……it’s a bit of a shame as whilst it’s absolutely not right for many people, it can be the right thing to do, particularly with annuity rates so low (meaning high transfer values). Obviously it’s hugely dependent on individual circumstances but it’s worked for me - apart from the improved return, then other aspect for me was essentially reduction/loss of the benefits on death which doesn’t happen with a SIPP.

The other aspect to consider for me in all this is when I do eventually get hit by a bus or whatever, neither Mrs D or the kids are sufficiently financially savvy to deal with things, so having an IFA/WM involved makes sense.

Coincidentally, there’s a DT article on DB transfers this morning

https://www.telegraph.co.uk/money/m...keover-should-cash-284k-final-salary-pension/

 

[Eric the meek]

At least if an IFA makes a mistake you have a mechanism of complaint and recompense though. Re pensions, unfortunately the FCA and TPR both hate DB pension exits so they’ve made the regulatory aspects so difficult most advisers have stopped doing it……it’s a bit of a shame as whilst it’s absolutely not right for many people, it can be the right thing to do, particularly with annuity rates so low (meaning high transfer values). Obviously it’s hugely dependent on individual circumstances but it’s worked for me - apart from the improved return, then other aspect for me was essentially reduction/loss of the benefits on death which doesn’t happen with a SIPP.

The other aspect to consider for me in all this is when I do eventually get hit by a bus or whatever, neither Mrs D or the kids are sufficiently financially savvy to deal with things, so having an IFA/WM involved makes sense.

Coincidentally, there’s a DT article on DB transfers this morning

https://www.telegraph.co.uk/money/m...keover-should-cash-284k-final-salary-pension/

Thanks for the link Dazzer. The deed is already done. My wife crystallised her DB pension a while back.

I take your last point. When the time comes, I'll get expert tax advice on IHT etc.

 

[Tim Over Whelmed]

“A popular way to estimate this figure is the ’70 per cent rule’, which states you will need 70 per cent of your working income to maintain the lifestyle you want in retirement. So if you retire on a salary of £50,000 you would be looking at achieving an income of around £35,000” just read this on a web site. Not sure how taking a 30% hit helps maintain your lifestyle.

Cost of travel, lunches, clothes etc, you'd be surprised how much less you spend without changing your other spends

 

[Tim Over Whelmed]

Reading here in envy as have 20 years before I hit sixty

Mortgage will be gone if not overpaid on my 60th, have around £9k per annum (index linked) previous final salary pension and putting away £12K a year into a new pension (current pot £40k) for me plus the wife’s c4k per annum.

No idea what the state pension will look like when our time comes

Might be the time now to ensure we are on the right track and seek the view of an IFA as have no intention what so ever of working beyond my state retirement age (67), ideally wrapped up before

The only thing I'll say about IFA's is my mates laughed at me a few years ago "paying for advice" when they felt they "got it for free", they were so wrong. The most expensive mistake you can make is getting cheap advice.

 

[Paulie Gualtieri]

For me, post of the year. Thanks. We only live on this planet for a limited time. Make the most of the
time we (you have).

It’s a point / view point I hadn’t considered prominently, but so true

 

[Eric the meek]

The only thing I'll say about IFA's is my mates laughed at me a few years ago "paying for advice" when they felt they "got it for free", they were so wrong. The most expensive mistake you can make is getting cheap advice.

That statement is both true and false. I'll explain.

Around 20 years ago, well before today's regulated, compliance landscape, my sister-in-law worked for Lucas Rists in Accrington, who made the wiring harnesses for Land Rovers. She had a guaranteed, defined benefit DB pension, with employer contributions.

One day, we were talking and she came out with 'company pensions are rubbish'. I asked why she thought that. Long story short, she was trying to justify a decision she and her colleagues had made. Someone had spoken to the staff, and persuaded them all to give up their DB pensions, and take out his recommended DC pension instead, which of course was not guaranteed, and came sans employer contributions. She didn't understand that she had exchanged a guaranteed pension for one that was not guaranteed, voluntarily taken a pay cut, was paying front loaded commission, and had downgraded her pension's ability to grow for the rest of its life. I suspect the salesman (or possibly an IFA), was invited in by the company management. It would have been a relatively simple way to cut staff costs.

To them, it was almost certainly presented as 'free advice', but was quite possibly the most expensive advice I've ever come across.

 

[Tim Over Whelmed]

That statement is both true and false. I'll explain.

Around 20 years ago, well before today's regulated, compliance landscape, my sister-in-law worked for Lucas Rists in Accrington, who made the wiring harnesses for Land Rovers. She had a guaranteed, defined benefit DB pension, with employer contributions.

One day, we were talking and she came out with 'company pensions are rubbish'. I asked why she thought that. Long story short, she was trying to justify a decision she and her colleagues had made. Someone had spoken to the staff, and persuaded them all to give up their DB pensions, and take out his recommended DC pension instead, which of course was not guaranteed, and came sans employer contributions. She didn't understand that she had exchanged a guaranteed pension for one that was not guaranteed, voluntarily taken a pay cut, was paying front loaded commission, and had downgraded her pension's ability to grow for the rest of its life. I suspect the salesman (or possibly an IFA), was invited in by the company management. It would have been a relatively simple way to cut staff costs.

To them, it was almost certainly presented as 'free advice', but was quite possibly the most expensive advice I've ever come across.

I think that's my point, I searched and got references for a lot of IFAs, I discussed commissions and how they were incentivised to help me and then got one I felt wasn't the cheapest but was best placed to help me grow my wealth. I take your point also though.

 

[mikeyjh]

“A popular way to estimate this figure is the ’70 per cent rule’, which states you will need 70 per cent of your working income to maintain the lifestyle you want in retirement. So if you retire on a salary of £50,000 you would be looking at achieving an income of around £35,000” just read this on a web site. Not sure how taking a 30% hit helps maintain your lifestyle.

I think the best way to work out how much you need to maintain your lifestyle is to keep a record of how much you spend, what is discretionary, what is not etc. Do this over a year but also think about things like cars, maintenance of one's home etc, it should give you a pretty good idea of what you're income needs to be. It's also a useful way to find out where you're spaffing money that you don't need to.

 

[dazzer6666]

I think the best way to work out how much you need to maintain your lifestyle is to keep a record of how much you spend, what is discretionary, what is not etc. Do this over a year but also think about things like cars, maintenance of one's home etc, it should give you a pretty good idea of what you're income needs to be. It's also a useful way to find out where you're spaffing money that you don't need to.

Didn’t bother keeping records for a year but simply made a list of ‘unavoidable’ spending (house, fuel, insurances, car expenses etc etc), using bank and card statements to make sure I’d captured all the direct debits and had reasonable estimates for groceries and suchlike. Then added sensible ‘lifestyle’ spending (eating out, short breaks etc). Left out bigger items such as long haul holidays, new cars and major house refurbishments as these are the ‘discretionary’ items. You’re right re unnecessary expenditure - found 2 or 3 things that I was still paying for that I’d not realised

 

[timbha]

Didn’t bother keeping records for a year but simply made a list of ‘unavoidable’ spending (house, fuel, insurances, car expenses etc etc), using bank and card statements to make sure I’d captured all the direct debits and had reasonable estimates for groceries and suchlike. Then added sensible ‘lifestyle’ spending (eating out, short breaks etc). Left out bigger items such as long haul holidays, new cars and major house refurbishments as these are the ‘discretionary’ items. You’re right re unnecessary expenditure - found 2 or 3 things that I was still paying for that I’d not realised

Spot on. How much I spend on the Albion was a bit of an eye opener (although not a surprise) but you have to be honest with yourself. It’s no good kidding yourself that you can get away with £50 on an away match (even if that’s what you tell the missus).

I factor in a few city breaks and a decent summer holiday each year, and a bigger holiday and new car every 4 or 5. If we don’t spend it all it’s a bonus

One very important change in approach that I learned was that it’s not how much you spend, it’s how much you’ve got left. Investment performance is the major influencer which is why my portfolio is 30% risk averse (cash, ISA - liquid) and the rest invested in the markets by an investment manager

It helps that I also have a decent DB pension.

 

[Eric the meek]

Didn’t bother keeping records for a year but simply made a list of ‘unavoidable’ spending (house, fuel, insurances, car expenses etc etc), using bank and card statements to make sure I’d captured all the direct debits and had reasonable estimates for groceries and suchlike. Then added sensible ‘lifestyle’ spending (eating out, short breaks etc). Left out bigger items such as long haul holidays, new cars and major house refurbishments as these are the ‘discretionary’ items. You’re right re unnecessary expenditure - found 2 or 3 things that I was still paying for that I’d not realised

It's interesting how people organise their finances.
It would seem I'm the opposite of you - not right or wrong, just the opposite.

I don't keep a close eye on the day to day expenditure, (but do make a mental note when a pot of 'cuticle repair cream' appears on the coffee table, or a £20 tin of beard balm appears in the bathroom).

What I do have is a spreadsheet with a row for every month, stretching out years into the future, with projected income from all sources, and planned expenditure on living expenses, together with big ticket items (cars, holidays, mortgage deals etc) that month. That way, the big expenses are always known and budgeted for well in advance. There are no surprises.

 

[timbha]

It's interesting how people organise their finances.
It would seem I'm the opposite of you - not right or wrong, just the opposite.

I don't keep a close eye on the day to day expenditure, (but do make a mental note when a pot of 'cuticle repair cream' appears on the coffee table, or a £20 tin of beard balm appears in the bathroom).

What I do have is a spreadsheet with a row for every month, stretching out years into the future, with projected income from all sources, and planned expenditure on living expenses, together with big ticket items (cars, holidays, mortgage deals etc) that month. That way, the big expenses are always known and budgeted for well in advance. There are no surprises.

Ha! And like my spreadsheet does it show how much you’ll be “worth” (or have left) when you pop your clogs aged 92 and a half!!

 

[Eric the meek]

Ha! And like my spreadsheet does it show how much you’ll be “worth” (or have left) when you pop your clogs aged 92 and a half!!

Mine doesn't go up to 92.5. I intend to die in Las Vegas, with a pile of coke and hookers aged 86. I've always been ambitious.

BTW, I absolutely agree with your bit about 'it's what you've got left'. That resonated with me!

Edit: I've just realised that reads like I want 86 year old hookers....

 

[Tim Over Whelmed]

What's also surprised me is how I've changed habits a little. We still have reasonably expensive mid-week breaks and meals out but when I go for a walk now I don't tend to add in a pub lunch and a few beers, opting more for some en-route snacks, enjoyed sat on a bench with a great view seems so much better, and then maybe grab a pint or not on the way home. A Sunday walk, with lunch for two, and a bottle of wine, could be upwards of £70, whereas now it's a packed lunch of my favourite things and a beer in The King's on the way home.

 

[Tim Over Whelmed]

Mine doesn't go up to 92.5. I intend to die in Las Vegas, with a pile of coke and hookers aged 86. I've always been ambitious.

BTW, I absolutely agree with your bit about 'it's what you've got left'. That resonated with me!

Edit: I've just realised that reads like I want 86 year old hookers....

Are there any others worth considering

 

[dazzer6666]

Mine doesn't go up to 92.5. I intend to die in Las Vegas, with a pile of coke and hookers aged 86. I've always been ambitious.

BTW, I absolutely agree with your bit about 'it's what you've got left'. That resonated with me!

Edit: I've just realised that reads like I want 86 year old hookers....

If you’re 92.5 an 86 yo hooker would be a result

 

[timbha]

If you’re 92.5 an 86 yo hooker would be a result

Not if it’s the rugby playing type hooker

 

[dazzer6666]

Spot on. How much I spend on the Albion was a bit of an eye opener (although not a surprise) but you have to be honest with yourself. It’s no good kidding yourself that you can get away with £50 on an away match (even if that’s what you tell the missus).

I factor in a few city breaks and a decent summer holiday each year, and a bigger holiday and new car every 4 or 5. If we don’t spend it all it’s a bonus

One very important change in approach that I learned was that it’s not how much you spend, it’s how much you’ve got left. Investment performance is the major influencer which is why my portfolio is 30% risk averse (cash, ISA - liquid) and the rest invested in the markets by an investment manager

It helps that I also have a decent DB pension.

Definitely this....my 'discretionary' spending in particular will be in part driven by investment performance. Part of the complexity I have is 3 separate DC pension pots from different employers, plus the ISAs and stuff that I play around with and trying to make sure that the 'portfolio' as a whole is reasonably well balanced - I can't treat each bit in isolation (but overall I'm still on the high side of medium risk I would say). I've tried to simplify things a bit by having one relatively high risk (SIPP) and the other two low to medium risk, and the other non-pension savings in a whole range of stuff from cash/PSBs to some quite high risk funds (I don't mess with direct equities much other than the odd speculative punt now and again). I very rarely trade anything, preferring a long term view. I can drawdown income (essentially growth, hopefully) from wherever is most appropriate (and tax efficient) at the time and hopefully not have to sell anything at a depressed value.