Savings and Investments thread

Haven't updated for a while, so with two months to go this is how we stand:

FTSE100 Level	7,237.57
Name	Level	Variance	% Variance
cafc7-6htfc	7228	9.57	0.13%
Redman	7255	17.43	0.24%
Addick Addick	7220	17.57	0.24%
Fortune 82nd Minute	7280	42.43	0.59%
Pedro45	7297	59.43	0.82%
thecat	7175	62.57	0.86%
Morboe	7312	74.43	1.03%
Thread Killer	7159	78.57	1.09%
Daarrrzzettbum	7333	95.43	1.32%
wwaddick	7340	102.43	1.42%
PragueAddick	7350	112.43	1.55%
StrikerFirmani	7355	117.43	1.62%
golfaddick	7375	137.43	1.90%
Salad	7100	137.57	1.90%
Bangkokaddick	7390	152.43	2.11%
@TelMc32	7080	157.57	2.18%
blackpool72	7400	162.43	2.24%
RalphMilne	7415	177.43	2.45%
Killer Kish	7440	202.43	2.80%
Exiledin Manchester	7450	212.43	2.94%
gunnessaddick	7458	220.43	3.05%
Housty	7466	228.43	3.16%
No.1 in South London	6985	252.57	3.49%
Hoof_it_up_to_benty	7495	257.43	3.56%
CAFCWest	7501	263.43	3.64%
Rob7Lee	7505	267.43	3.70%
Covered End	7512	274.43	3.79%
meldrew66	7535	297.43	4.11%
WishIdStayedInThe Pub	7544	306.43	4.23%
Gary Poole	7574	336.43	4.65%
CharltonKerry	7594	356.43	4.92%
Huskaris	7596	358.43	4.95%
holyjo	7612	374.43	5.17%
IdleHans	7634	396.43	5.48%
LargeAddick	7647	409.43	5.66%
valleynick66	7654	416.43	5.75%
MrOneLung	7654	416.43	5.75%
KentAddick	7676	438.43	6.06%
fat man on a moped	7681	443.43	6.13%
HardyAddick	7692	454.43	6.28%
Lonelynorthernaddick	7700	462.43	6.39%
oohaahmortimer	6767	470.57	6.50%
bobmunro	7784	546.43	7.55%
Er_Be_Ab_Pl_Wo_Wo_Ch	6500	737.57	10.19%

RaplhMilne said:

golfaddick said:

RaplhMilne said:

Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to. 

A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension.  I’m astounded is that really the sort of figures that are currently being offered…. ???

It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away. 

However, I will caveat that with this. Your friend will need to take advice from a DB  Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.

Golfie,  yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with. 

Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out.  But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply. 

It is a simple way of looking at things. However the big thing you miss is inflation. This can seriously damage a non inflation based drawdown (ie the £6k in your example). We have had a period of low inflation but things are changing, We forget how damaging inflation is to fixed income. Lot of things to consider. 

redman said:

RaplhMilne said:

golfaddick said:

RaplhMilne said:

Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to. 

A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension.  I’m astounded is that really the sort of figures that are currently being offered…. ???

It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away. 

However, I will caveat that with this. Your friend will need to take advice from a DB  Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.

Golfie,  yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with. 

Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out.  But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply. 

It is a simple way of looking at things. However the big thing you miss is inflation. This can seriously damage a non inflation based drawdown (ie the £6k in your example). We have had a period of low inflation but things are changing, We forget how damaging inflation is to fixed income. Lot of things to consider. 

Yes, inflation is a major factor, but this £3000 pension in 2010 would be £3933 today. So let’s say in 20 years it’s become £5,500. That’s still below what he could have been drawing for the entire 20 years. An iv left a margin for £30,000 loss over the period, with no gains at any point. Which would be a pretty unlikely scenario…. 

So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?

Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?

Too simplistic?

golfaddick said:

valleynick66 said:

So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?

Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?

Too simplistic?

Not too simplistic just the wrong investments. DB schemes have to invest in Gilts for their pensionable members. If DB schemes had the option to invest in all the asset classes available then I'm pretty sure they would nit be offering large incentives for members to transfer out  

With regard to @ralphmilne's friend. It really is a no brainer & you would have to be either risk adverse or stupid not to take the transfer. I usually use 4% as a rate for Drawdown plans & all my clients funds are comfortably ahead of their original starting point. 

Assuming the tax free cash has already been taken from the £211k figure then 4%pa would pay just under £8500pa......almost 3x the DB payment. Even, as @ralphmilne says  you start off with a lower figure than this (say £6k) you could then factor in inflation and increase the annual pension over the years. 

Fwiw - I expect that the 25% tfc has not been taken out of the £211k & so the member would have over £50k tax free to work with too, before even thinking about Drawdown. 

Thanks and very helpful - so just to validate my understanding of your reply:

1. DB scheme can only invest in Gilts for those members receiving a pension but it can invest in other asset classes for its other members?
2. Gilts paying closer to 1% (I guess) than your 4% forecast if across a range of asset classes?
3. The 4% you reference is what you'd expect a portfolio in partial drawdown to still be able to return i.e. presumably having switched to a relatively moderate risk type profile?

redman said:

RaplhMilne said:

redman said:

RaplhMilne said:

golfaddick said:

RaplhMilne said:

Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to. 

A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension.  I’m astounded is that really the sort of figures that are currently being offered…. ???

It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away. 

However, I will caveat that with this. Your friend will need to take advice from a DB  Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.

Golfie,  yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with. 

Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out.  But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply. 

It is a simple way of looking at things. However the big thing you miss is inflation. This can seriously damage a non inflation based drawdown (ie the £6k in your example). We have had a period of low inflation but things are changing, We forget how damaging inflation is to fixed income. Lot of things to consider. 

Yes, inflation is a major factor, but this £3000 pension in 2010 would be £3933 today. So let’s say in 20 years it’s become £5,500. That’s still below what he could have been drawing for the entire 20 years. An iv left a margin for £30,000 loss over the period, with no gains at any point. Which would be a pretty unlikely scenario…. 

We have had a period of very low inflation. It is forecast by actuaries to be higher in the future while guilt yields remain low. It's certainly not the only factor but one that must not be forgotten. valleynick66 said:

So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?

Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?

Too simplistic?

There are several factors. Ultimately the sponsoring employer has ultimate liabilty. This liabilty is estimated and can vary considerably taking into account life expectancy, investment returns, inflation etc. Life expectancy has risen significantly in the last 30 years and given companies a shock at the extra amounts needed to pay into a scheme. Likewise gilt yields have fallen. Ironically the PPF have been putting heavy pressure on schemes to invest in gilts rather than equities, which widens pension scheme deficits and forces companies to pay more. 
The result of all this is that some companies like to incentivise members of the scheme to transfer their benefits out. Sometimes significantly just so they have a certain liability rather than estimated. 
Because all schemes act differently it makes it crucial an individual takes advice before taking action

Yes, Liability Driven Investment has been a nice merry-go-round for the bond market (and the government, who, err, ultimately make the rules).  You HAVE to match potential out-goings and the only instruments that can guarantee long-term payments are bonds.  The safest bonds are government bonds.  Demand for bonds therefore goes up, forcing prices up, yields down, etc.  Which means you have to buy more bonds.  Rinse, repeat.

Add in a falling Bank rate, increasing life expectancy and quantitative easing and bond yields fall even further.

All okay as long as inflation doesn't pick up ....

Premium Bonds, £75 for me, £50 for Mrs R7L - Blankety Blank for the kids!

Nothing for me, however down £20k in holdings in the last couple of months.

Rob7Lee said:

Premium Bonds, £75 for me, £50 for Mrs R7L - Blankety Blank for the kids!

£125 for Father in law....

£100 again for me this month from the PBs. A bit different to the beginning of the year when I was getting bugger all. Jnr got £150 including a £50 for the second month running! Nothing for Mrs Chaz though.

grumpyaddick said:

I am always really impressed with the expertise on here so I am Just putting this sad pension tale out there so those in the know can howl in derision at my ignorance or warn me off if it’s a completely insane plan.

I have two very small Aviva private pension funds which I acquired years ago (about 65K total). Having recently reached the big six zero I thought I better do something about them. I have had a session with the Pension Wise rep which I found to be very good and approached three IFAs so far and none have yet offered anything useful at all. In all three cases I completed a form to authorize Aviva to release details to them and then nothing happened.  When I asked about their fees, they seemed very high- up to 3% to deal with the funds and then another annual charge for management. No offence to those who do this for a living but I felt very uncomfortable about dealing with them. Maybe my pot is just too small for them to piss in. 

I would be happy to pay a flat fee for advice from an independent expert as I would with a solicitor or private doctor but don’t really want recurring % charges for the rest of my life for one conversation.

Therefore, I decided to cut out the middle man and deal with Aviva direct. They don’t offer advice (actually they refused to give it even if I paid for it). I am looking at taking 25% of the fund as a tax-free lump sum and bunging the remainder into a SIPP (Aviva Insured Funds Investment Pathway 1) as a safe place it which allows me to take it as cash when and if I need it. Aviva charge 0.4% to set this up so that seems a bargain compared to going via the IFA and they seem big, safe and unlikely to go bust when the shit hits the fan. I am not looking for mega growth or an income/annuity- just a safe haven that offers something better than a bank deposit account.

Very grateful for any sensible feedback. Thanks.

Age? And as well as the 0.4% is there a charge for the chosen fund?

EDIT: just looked and it appears to have a 0.15% fee, so assuming the 0.4% is annual, then the true charge is 0.55%, you can achieve better (someone like Vanguard, check but I think they are 0.15% account fee and depends on fund chosen but their 'standard' ones are low, some as low as 0.06%)

jonseventyfive said:

Apologies I would assume it's mentioned somewhere, but is there a maximum limit on premium bonds? 

£50k

grumpyaddick said:

I am always really impressed with the expertise on here so I am Just putting this sad pension tale out there so those in the know can howl in derision at my ignorance or warn me off if it’s a completely insane plan.

I have two very small Aviva private pension funds which I acquired years ago (about 65K total). Having recently reached the big six zero I thought I better do something about them. I have had a session with the Pension Wise rep which I found to be very good and approached three IFAs so far and none have yet offered anything useful at all. In all three cases I completed a form to authorize Aviva to release details to them and then nothing happened.  When I asked about their fees, they seemed very high- up to 3% to deal with the funds and then another annual charge for management. No offence to those who do this for a living but I felt very uncomfortable about dealing with them. Maybe my pot is just too small for them to piss in. 

I would be happy to pay a flat fee for advice from an independent expert as I would with a solicitor or private doctor but don’t really want recurring % charges for the rest of my life for one conversation.

Therefore, I decided to cut out the middle man and deal with Aviva direct. They don’t offer advice (actually they refused to give it even if I paid for it). I am looking at taking 25% of the fund as a tax-free lump sum and bunging the remainder into a SIPP (Aviva Insured Funds Investment Pathway 1) as a safe place it which allows me to take it as cash when and if I need it. Aviva charge 0.4% to set this up so that seems a bargain compared to going via the IFA and they seem big, safe and unlikely to go bust when the shit hits the fan. I am not looking for mega growth or an income/annuity- just a safe haven that offers something better than a bank deposit account.

Very grateful for any sensible feedback. Thanks.

Hi.  The first thing to say is that an IFA would want to understand a lot more about your financial situation and appetite for risk before being able to give you best advice.  @golfaddick of this parish would be a good option to talk to.

In a lot of cases, though, taking the lump sum makes sense for tax reasons.  You could recycle that into an ISA and pay no more tax on income or growth.  Or blow it on hookers, champagne, coke and nice breads as George Best nearly said.

I personally also wouldn't pay on-going charges based on a percentage of assets under management as it pays regardless of the quality of advice.  A fee based on out-performance, maybe, but then that can skew advice towards overly risky assets and, again, it's a one-sided deal, with only you losing if the advice is bad.  

But I know plenty of very savvy financial people in the City who are happy to do this as it gives them peace of mind and they're not interested in investment as a hobby - they would rather spend their rapidly diminishing time on other things.

A flat fee up front and an on-going flat fee would seem to me to be more appropriate and, ultimately, why I didn't go into this business, despite having qualified to do so.

As for the choice of investment plan, I'm not sure Aviva are going to give you the best quality plan.  There are plenty of better funds and mangers out there - again, Golfie is your friend here as others would testify on this thread.  

Last, your money is safe if you are investing in any kind of SIPP from a main-stream provider.  There's no real counter-party risk with these things - the money should be ring-fenced in client accounts and is protected (beyond the level you are talking about) should for some reason the broker breaks the law on that.

Good luck with your decision!

Very many thanks for all that feedback.  Really appreciate it. Sounds like it's isn't the most shrewd move to stick with Aviva but not totally stupid either.

They offer four different risk levels too. 

I would be happy to pay say 300 quid for one hour decent detailed advice and help with the paperwork. But 1800 quid to fill some forms in seems a bit steep. If I had a big fund I wouldn't be at all happy with 3%  

Interested you say don't take the dosh unless I need it. I am still working and have a small armed forces  pension that just started at 60 so don't really need it at the moment. 

Thanks again.  

LargeAddick said:

My wife wanted to recently transfer a Aviva pension into one of their SIPP products. From what we could ascertain, and were told by them, was that if you do so you have to manage the funds yourself so beware of that or if you did want them to manage it then the product available was more restrictive and less flexible on withdrawals. As a result though I don't think there is an ongoing advisor charge as you are managing it yourself.

Yes. That was my interpretation too. Quite happy to monitor it myself.  Thanks.