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Savings and Investments thread

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  • Rob7Lee said:

    I transferred a DB pension into my SIPP on the basis that I felt with 21 years officially to retirement I could do much better. Which since last Feb I have, up over 40%. Also they were paying a silly multiplier (about 35x the indexed amount). So my 125k from that is currently about 185k.

    I saw an IFA and another company did a 55 page report on it before either provider would release or receive said monies, all in cost me about £800.

    It may turn out to be the right decision or the wrong one but at least I'm in control now, my DB pension halved if I died first, disappears once both my wife and I are gone. Whereas currently I can leave my pot to my children and my plan is to do just that (rather than use it).

    What you can never replace is the risk of outliving your pension pot, a DB pension removes that risk.
    This is very true, however my DB made up a small proportion of my overall pension fund (both now and likely future values).

    I'm switching out of pensions next tax year (in that I'm not investing anymore although my company will, to an extent) as the tax break on entry will no longer apply to me.

    So it's switching from tax free in and taxed out to taxed in and tax free out (i.e. i'll be loading up both mine and my wifes S&S ISA's).

    To add my wife is a lower earner, therefore I do pay £2,880 a year into a pension for her (3,600 goes in after tax relief), highly recommended if you can and your better half either doesn't work or small wage. No point me having a pension and paying 40% tax on it and her having little income and not even making full use of whatever tax free allowance is by then let alone the full 20% rate.
  • Question. Golf Addick I'm sure you can answer this. I have. DB pension employed by a bank, my lifetime allowance used is calculated as about £700,000. Now if i asked for a CETV I'm told it would be about £1.5 Million. As that breaks the £1 MIllion LTA, would I have to pay 55 % tax on the £500,000 over LTA. Thus having £1.225 Million to invest.




    Your LTA is only calculated when you draw benefits, and from 2018 goes up in line with inflation. So a current CETV can't be compared with the pension value at retirement unless you are about to take your benefits.

    A £700k LTA is a DB pension of around £35k p.a. If it's about to be paid, and you could instead have a cash transfer value of £1.225 it does not mean you are able to invest it and guarantee a stream of income bigger than £35k p.a, particularly if the £35k is inflation proofed. So if you are going to invest the £1.225, why bother if it can't match £35k p.a and the DB scheme is already investing it and guaranteeing that amount of income for life without you taking any investment risk and without the risk of you giving too long.

    However, you will probably be looking at the vast difference in cash payout, rather than income i'm sure. You can get £250k tax free from the CETV compared to perhaps around £175k from the DB scheme. The 55% only applies to the additional cash you take above the limit, you will still, cash wise be net better off. It's more about what you can do with the extra cash than investing £1.225m, which might or might not beat the £35k p.a. DB pension. It's the net total value after tax that counts, avoiding tax for the sake of it is not necessarily sensible.

    You are required by law to take advice before you could take your CETV from a DB scheme, a good adviser will be able to offer a range of scenarios showing worst and best outcomes. If you are concerned with long term security and income guaranteed for life then the DB pension will take some beating, the attraction of cash can mask reality and leaving a small cash pot to last your lifetime can turn out to be a regretted decision. Unless you need the cash to spend, pay off a mortgage etc., it might be the wrong choice to deplete your retirement fund of cash just because you can. If you don't spend the cash you raise, you will need to invest it, presumably for income, which is what your DB pension was doing in the first place. Government is encouraging people to maximise cash because you pay more tax.

    This is where IFAs should be earning their corn, it's a real complex area.
    Dippenhall , thanks very much for very comprehensive response. I am taking pension this year, as you say my pension is around £35,000. I also have an AVC i have been paying into. To hit my 25% tax free lump I am commuting about £5000 of my pension at £15,000 cash to £1,000 per pension. My pension is RPI linked and guaranteed for 5 years and 50% to spouse. As you say the cash sum on offer is mesmerising, but appreciate that all the risks suddenly become mine. Your comments are greatly appreciated and give me food for thought.
  • Thanks @Dippenhall I didn't mean monitor in terms of moving it around, I was thinking more in terms of fees I'm paying for the fund on things like nutmeg or HL. Taking advantage of new customer offers and such.

    So that's it settled, I'll pick a savings isa just to get the money out of my current account, and under the limit of the Santander one. I don't mind the prospect of losing a bit short term to make longer term gains but I am not sure my current life situation is conducive to this.

    I am keen to invest, so I will put a smaller amount into this, any advice on where to go to look at the available funds, is the market you track an industry by industry thing?

    It's perhaps worth noting that with effect from April, we all get a "Personal Savings Allowance". This means, in brief that the first £1,000 of any interest, etc is tax free anyway. So, for many savers the question will now be "what is going to give me the best rate of return for the type of savings I want?" rather than "how can I shelter my income from tax?".

    It will be interesting to see how this impacts the whole industry that had grown up around the provision of tax efficient (but not necessarily income or fees efficient) wrappers.

    This article from the BBC (although actually Hargreaves Lansdown's work) setting out the best performers and the worst over the last 10 years is quite interesting. bbc.co.uk/news/business-39152282
    If nothing else it demonstrates what a hard road it is for savers at the moment. To be "in profit" after inflation over ten years, your £10k would now need to be worth at least £12,538. The average "equity income" fund manger achieved £17,796 and a FTSE All-share tracker £16,367. The best got to £22,697. But the worst fund manager only got to a figure of £11,849. Terrible - but still better than a high street savings account - £11,361.

    But the article doesn't really make it clear that this is just one sector. So, the Old Mutual fund I mentioned previously has turned £10k into £27.9k in the same period and even it's sector average is £21.4k, not far off the best fund manger in the article.

    Choose carefully there are some right old dogs out there. It's always worth checking the performance charts on somewhere like morningstar.co.uk. While it's true to say that past performance is not a guide to what might happen in the future, it's strangely not necessarily true of the dogs, where "once a dog always a dog" is a much more likely scenario.

    This "Spot the Dog" report in the FT makes harrowing reading https://ft.com/content/0eac4920-e941-11e6-893c-082c54a7f539 and might also go some way towards explaining the talk of a take over of Aberdeen Asset Management by Standard Life. My guess would be that the Aberdeen funds are in the frame for a re-brand. Of course, merely changing their name won't improve their performance.
  • cafcfan said:

    Thanks @Dippenhall I didn't mean monitor in terms of moving it around, I was thinking more in terms of fees I'm paying for the fund on things like nutmeg or HL. Taking advantage of new customer offers and such.

    So that's it settled, I'll pick a savings isa just to get the money out of my current account, and under the limit of the Santander one. I don't mind the prospect of losing a bit short term to make longer term gains but I am not sure my current life situation is conducive to this.

    I am keen to invest, so I will put a smaller amount into this, any advice on where to go to look at the available funds, is the market you track an industry by industry thing?

    It's perhaps worth noting that with effect from April, we all get a "Personal Savings Allowance". This means, in brief that the first £1,000 of any interest, etc is tax free anyway. So, for many savers the question will now be "what is going to give me the best rate of return for the type of savings I want?" rather than "how can I shelter my income from tax?".

    It will be interesting to see how this impacts the whole industry that had grown up around the provision of tax efficient (but not necessarily income or fees efficient) wrappers.

    This article from the BBC (although actually Hargreaves Lansdown's work) setting out the best performers and the worst over the last 10 years is quite interesting. bbc.co.uk/news/business-39152282
    If nothing else it demonstrates what a hard road it is for savers at the moment. To be "in profit" after inflation over ten years, your £10k would now need to be worth at least £12,538. The average "equity income" fund manger achieved £17,796 and a FTSE All-share tracker £16,367. The best got to £22,697. But the worst fund manager only got to a figure of £11,849. Terrible - but still better than a high street savings account - £11,361.

    But the article doesn't really make it clear that this is just one sector. So, the Old Mutual fund I mentioned previously has turned £10k into £27.9k in the same period and even it's sector average is £21.4k, not far off the best fund manger in the article.

    Choose carefully there are some right old dogs out there. It's always worth checking the performance charts on somewhere like morningstar.co.uk. While it's true to say that past performance is not a guide to what might happen in the future, it's strangely not necessarily true of the dogs, where "once a dog always a dog" is a much more likely scenario.

    This "Spot the Dog" report in the FT makes harrowing reading https://ft.com/content/0eac4920-e941-11e6-893c-082c54a7f539 and might also go some way towards explaining the talk of a take over of Aberdeen Asset Management by Standard Life. My guess would be that the Aberdeen funds are in the frame for a re-brand. Of course, merely changing their name won't improve their performance.
    Already in effect. The personal saving allowance started April 2016.
  • and is only £1k if you are a lower rate tax payer.
  • cafcfan said:

    Thanks @Dippenhall I didn't mean monitor in terms of moving it around, I was thinking more in terms of fees I'm paying for the fund on things like nutmeg or HL. Taking advantage of new customer offers and such.

    So that's it settled, I'll pick a savings isa just to get the money out of my current account, and under the limit of the Santander one. I don't mind the prospect of losing a bit short term to make longer term gains but I am not sure my current life situation is conducive to this.

    I am keen to invest, so I will put a smaller amount into this, any advice on where to go to look at the available funds, is the market you track an industry by industry thing?

    It's perhaps worth noting that with effect from April, we all get a "Personal Savings Allowance". This means, in brief that the first £1,000 of any interest, etc is tax free anyway. So, for many savers the question will now be "what is going to give me the best rate of return for the type of savings I want?" rather than "how can I shelter my income from tax?".

    It will be interesting to see how this impacts the whole industry that had grown up around the provision of tax efficient (but not necessarily income or fees efficient) wrappers.

    This article from the BBC (although actually Hargreaves Lansdown's work) setting out the best performers and the worst over the last 10 years is quite interesting. bbc.co.uk/news/business-39152282
    If nothing else it demonstrates what a hard road it is for savers at the moment. To be "in profit" after inflation over ten years, your £10k would now need to be worth at least £12,538. The average "equity income" fund manger achieved £17,796 and a FTSE All-share tracker £16,367. The best got to £22,697. But the worst fund manager only got to a figure of £11,849. Terrible - but still better than a high street savings account - £11,361.

    But the article doesn't really make it clear that this is just one sector. So, the Old Mutual fund I mentioned previously has turned £10k into £27.9k in the same period and even it's sector average is £21.4k, not far off the best fund manger in the article.

    Choose carefully there are some right old dogs out there. It's always worth checking the performance charts on somewhere like morningstar.co.uk. While it's true to say that past performance is not a guide to what might happen in the future, it's strangely not necessarily true of the dogs, where "once a dog always a dog" is a much more likely scenario.

    This "Spot the Dog" report in the FT makes harrowing reading https://ft.com/content/0eac4920-e941-11e6-893c-082c54a7f539 and might also go some way towards explaining the talk of a take over of Aberdeen Asset Management by Standard Life. My guess would be that the Aberdeen funds are in the frame for a re-brand. Of course, merely changing their name won't improve their performance.
    The BBC/HL review focuses on "Equity Income" funds which generally means investing in businesses which tend to be large, mature and reliable cash generators. This asset class will be light in small cap companies which deliver short term capital growth rather than long term cash dividends. The success of the Old Mutual Small Cap fund is less a reflection of manager skill than the fact that small cap companies have performed on average better than larger mature businesses. Many other small cap funds will have beaten the star equity income funds, it's simply the relative success of one asset class v another.

    Betting on the winning asset class via a low cost tracker fund, or even if a relative dog in that sector, could do better than the top performing manager fund in an asset class that bombs.

    Betting on managers, and ignoring asset class exposure, is the single biggest error in choosing nvestment strategies.

    Quote from FT article:

    According to Morningstar, the data provider, the majority of top-rated active funds have underperformed their benchmarks since 2008, highlighting the difficulty investors face in choosing funds that are worth paying for.


    The proof that the premium for seeking out-performance is not rewarded is there for all to see. The truth is that we would rather believe the hype of the investment industry who need to sell, recycle and re-invent their products and they can't make easy money out of tracker funds.

    More FT quotes:

    Mr Hollands said he believed no one group had a “systemic issue with poor performance”, but warned investors to beware star managers. “When all is going well, funds are heavily promoted and managers are feted like City rock stars,” said Mr Hollands. “Yet some of these stars may have simply got lucky and turned to be shooting stars that crash out of orbit

    This is a lot of academic research to prove very few managers consistently add value after costs. Following quote from a 2005 academic paper based on statistical analysis:
    "........The strong message from these results is that there are a few ‘top funds’ who have genuine skill but the majority have either no skill and do well because of luck or, perform worse than bad luck and essentially waste investors time and money. If you choose your active funds by throwing darts at the Financial Times’ mutual fund pages, then you are highly likely to choose a fund which has no skill - you would be better off choosing an index fund (especially after transactions costs). On the other hand, a careful analysis of risk adjusted performance taking full account of luck across all funds, can identify with reasonable probability, those few funds with genuine skill."

    The few funds with genuine skill which were identified (7 out of the universe of top managers), fell into the equity income funds. Hence the logic for the focus in the BBS/HL article.

    In 99.9% of cases, paying fund managers for active fund management is like paying Honest Joe for his horse racing tips on Epsom Downs.







  • Can anyone help please.

    My young girls have been given £1000 each by their grandparents they want them to have it on their 18th birthday which is in 8-10 years what are my best options.
    Thanks in advance BBB
  • Can anyone help please.

    My young girls have been given £1000 each by their grandparents they want them to have it on their 18th birthday which is in 8-10 years what are my best options.
    Thanks in advance BBB

    Don't tell the girls. Buy yourself a nice bit of essential dogs electronics kit.
  • Can anyone help please.

    My young girls have been given £1000 each by their grandparents they want them to have it on their 18th birthday which is in 8-10 years what are my best options.
    Thanks in advance BBB

    gold
  • edited March 2017

    Can anyone help please.

    My young girls have been given £1000 each by their grandparents they want them to have it on their 18th birthday which is in 8-10 years what are my best options.
    Thanks in advance BBB

    Put it in your name & don't tell them. You can then give it to them if you feel that they are sensible enough.
    If it's in their name they can withdraw and blow the lot on their 18th birthday, or decide to do bugger all for years until the money has run out.
    I speak from experience.
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  • Buy £2000 of Lloyds Bank shares and reinvest the dividends. After a long period of bad times, the shoots of recovery are there. Yes, Brexit hangover the bank, but despite that the long term looks good. £2000 is to lower amount to trickle in. So just buy and hold.
  • Cheers Ralph
  • Cheers Ralph

    I'm not a professional advisor or qualified to give advice. But, it's what I would do. The sum is to small to diversify by much. So I'd go for a good divi and prospect of some capital growth. An in the period your talking about, I think lloyds is a reasonable bet.
  • Cheers Ralph

    fuck ya then ;)
  • Buy £2000 of Lloyds Bank shares and reinvest the dividends. After a long period of bad times, the shoots of recovery are there. Yes, Brexit hangover the bank, but despite that the long term looks good. £2000 is to lower amount to trickle in. So just buy and hold.

    I hope your correct, received llyods a few years ago and hopefully they'll buy me a beer or two in the future.
  • Thanks CE, I'll probably sit tight for years and see what happens, I may add to them as well, as I'm doing with the restarting divis, this time next year I'll be a, well maybe not.
  • To all the financial / stockbroker experts on here, I want to put my ISA allowance (lump sum) into a stocks unit trust this year. The question is what sector - UK, USA, Global, Far East etc etc. Any tips?
  • To all the financial / stockbroker experts on here, I want to put my ISA allowance (lump sum) into a stocks unit trust this year. The question is what sector - UK, USA, Global, Far East etc etc. Any tips?

    This is an impossible question for anybody to answer. Primarily because you haven't said whether you already have investments and also what your attitude to risk is. Or whether you'd prefer income to growth, etc, etc. Even you age/years until retirement should have an input to the decision-making. In addition, as well as the company/sector risk, are you happy being exposed to foreign exchange fluctuations? (It's actually quite difficult not to be. By way of example, Smith & Nephew shares although listed on the London Exchange have a nominal value in US$ and pay their dividend in $, which is then converted to sterling when the dividend is paid out.) So the dividend payout is not only effected by the profitability of the company but also the £/$ exchange rate.

    Anyway, again by way of example, here's a "balanced portfolio" pie chart. It's one firm's idea and it's old so PLEASE don't follow it. But it gives you an idea about how to avoid the age-old problem of having all your eggs in one basket.

    image
  • I echo the above. A mixed portfolio is the way to go - the % allocations all depends on your attitude to risk, time horizon, existing investments etc etc, - but something akin to the above portfolio should suit most, although I personally would limit property to 10% and increase the global equity allocation
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  • thanks guys. my current other assets are spread and mixed. i am looking to put the money away for 7-10 years for capital growth and dont mind risk but not very risky investments. Dont mind FX fluctuations. does this help?
  • To all the financial / stockbroker experts on here, I want to put my ISA allowance (lump sum) into a stocks unit trust this year. The question is what sector - UK, USA, Global, Far East etc etc. Any tips?

    Echo above re balanced funds.

    As attached shows the winners one year are often the losers next year. Politics and what politicians say can move assets classes in any direction in an instant.

    Investing is no different from betting, except it's like bookmakers could change the odds before the race is finished, so starting odds for any single investment (or experts' opinions) are not very reliable indicators of outcomes.

    Mixing investments means you can bet on all the horses in the race and each one pays you back something that with luck will amount to more than you laid out, as long as you don't overload on the riskiest ones or the slow burners. The odds also change depending on whether you are looking at the position at the finish after 3 miles or after 8 furlongs

    A balanced fund composition is based on how you judge the relative performance of the various classes, not so much with absolute performances.

    Looking at some 2016 figures the balanced fund I am looking at did 21% overall. That compares with the best large class of assets Emerging Markets at 43%. The lowest was Bonds 8% (cash and gilts not worth measuring). So diversification meant getting 50% of what the best single asset class did and 250% better than putting it all in corporate bonds.

    Personally, the benefit of trying to get the highest sub class return isn't worth the risk, e.g Brazil Equities returned 63% for 2016 within the emerging market class overall return of 43%. In 2015 Brazil was the worst performing sub class in Emerging Markets at minus 41%. Many experts did tip Brazil for 2016 and the balanced funds would have been able to increase exposure if they had the same sentiment, without you having to bet everything on Brazil or following the tipster who went for Nigeria at minus 43%.

    If you can afford to lose it, and are doing it for the rush, go for it, but remain clear whether you are saving or betting, the latter is just a hobby.
  • It sounds as though you just want to invest and not manage it regularly so I would just opt for the cheapest global equity tracker and/or ETF that you can find and hope for the best.
  • edited March 2017
    Can someone let me know what the p/e ratio and dividend yields are for both FTSE100 and FTAll Share Indices.
    I used to get them from FT myself but now I have retired I don't have access and live miles from a newsagent that might even have one.

    Also surprised these stats aren't online anyway. At least as far as I can see.

    Thanks in advance
  • redman said:

    Can someone let me know what the p/e ratio and dividend yields are for both FTSE100 and FTAll Share Indices.
    I used to get them from FT myself but now I have retired I don't have access and live miles from a newsagent that might even have one.

    Also surprised these stats aren't online anyway. At least as far as I can see.

    Thanks in advance

    According to this site dividenddata.co.uk/dividendyield.py?market=ftse100 which lists yields for each constituent also, the aggregate yield for the FTSE 100 is currently 3.73%
  • This site siblisresearch.com/data/ftse-all-total-return-dividend/ seems to have more historical data and says the all-share yield is currently 3.52. But it also says the yield on the FTSE 100 is 3.69% - slightly different from the other site.
    I have failed to find an aggregate P/E ratio.
  • Aah, here you go: siblisresearch.com/data/ftse-100-cape-pe-yield/
    Actually that's a pretty useful site. If it's accurate!
  • cafcfan said:

    Aah, here you go: siblisresearch.com/data/ftse-100-cape-pe-yield/
    Actually that's a pretty useful site. If it's accurate!

    Thanks for all of above.
  • FTSE has always had an anomalously high dividend yield as it is chock full of stodgy defensive companies.
  • Hi all,

    Looking for some advice re: ISAs/Savings

    I'm currently unemployed, got back from a stint travelling. I've been out of work for about 3 months now and living on my savings. I have about £6k in a Nutmeg stocks and shares isa and another £12k or so sitting in a Santander 123 current account which I'm living on.

    As the deadline to fill up my isa is approaching, is it worth me putting a chunk in there or keeping it in there the current account where I have instant access and the capital is not at risk? I understand the money isn't really 'working' for me in the recently downgraded Santander a/c but I figure it's at least accessible and not at risk.

    I'm finding the job market particularly tough, missed out on a few roles but will persevere. Luckily I don't have particularly high living costs at the moment.

    Any advice would be much appreciated!
    Thanks
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