Pensions - managed vs unmanaged

[youngguy]

Hmmm, I have a pension which I put 40k into pa. Charges are 1.5 but I always took the view that I'd be willing to pay someone to do the thinking and it's a tax efficient way of ensuring the ltd doesn't store too much cash. I know JACK about funds etc and always figured I'd probably lose more than someone else charges. Now I am not so sure...

[Lockhouse]

I've decided recently to go with managed. I'm 55 this year, didn't have a proper pension, had a fair amount of money in the company and needed assistance with an unwinding strategy. The tax advice and assistance in getting the timing correct were worth the charges.

[Fred Bloggs]

Hmmm, I have a pension which I put 40k into pa. Charges are 1.5 but I always took the view that I'd be willing to pay someone to do the thinking and it's a tax efficient way of ensuring the ltd doesn't store too much cash. I know JACK about funds etc and always figured I'd probably lose more than someone else charges. Now I am not so sure...

Seriously, you don't need to know much about funds. Stick the money in World Index tracker and sit back to wait for pot to grow and very low cost. Or, stick the money in a long time respected unit/investment trust, then sit back and wait for the pot to grow. Simples. IFA's want you to think it is dead complicated, don't they?

[Maslins]

As a complete non-expert, I think there's two separate things you can potentially pay for with this kind of stuff:

1) your typical IFA - they'll discuss your current and future plans, what your attitude to risk is, when you want to retire etc. They should also be reasonably savvy on the tax side of investments. They can help advise how much to put into the pension pot.

2) your fund manager - you won't get any advice from this. They will invest the money in your pot in a way that hopefully beats the market, using their knowledge and experience of picking shares.

Up to you whether you have either/both.

Many on here will say that the latter kind will very rarely be able to beat the market, especially when their fees are taken into account, and would therefore just recommend passive trackers. I'd tend to agree with them. The former it really comes down to how savvy you are with this kind of thing, and if you're putting in sizeable sums and do it wrong (eg breaching annual cap or something like that) then you could be heavily stung.

[kaiser78]

Hmmm, I have a pension which I put 40k into pa. Charges are 1.5 but I always took the view that I'd be willing to pay someone to do the thinking and it's a tax efficient way of ensuring the ltd doesn't store too much cash. I know JACK about funds etc and always figured I'd probably lose more than someone else charges. Now I am not so sure...

I pay my IFA 1% to service my investments. I am also thinking about changing over to a tracker fund and not using him anymore, but the investments he uses perform better than trackers, so make sense to stay with him (I think).

[kaiser78]

As a complete non-expert, I think there's two separate things you can potentially pay for with this kind of stuff:

1) your typical IFA - they'll discuss your current and future plans, what your attitude to risk is, when you want to retire etc. They should also be reasonably savvy on the tax side of investments. They can help advise how much to put into the pension pot.

2) your fund manager - you won't get any advice from this. They will invest the money in your pot in a way that hopefully beats the market, using their knowledge and experience of picking shares.

Up to you whether you have either/both.

Many on here will say that the latter kind will very rarely be able to beat the market, especially when their fees are taken into account, and would therefore just recommend passive trackers. I'd tend to agree with them. The former it really comes down to how savvy you are with this kind of thing, and if you're putting in sizeable sums and do it wrong (eg breaching annual cap or something like that) then you could be heavily stung.

I read that rule of thumb should if value of investments is greater than £100k then take the advice of an IFA. If less than £100k then tracker funds would be sufficient.

[Fred Bloggs]

I pay my IFA 1% to service my investments. I am also thinking about changing over to a tracker fund and not using him anymore, but the investments he uses perform better than trackers, so make sense to stay with him (I think).

Here is something to think about - you pay your IFA 1% a year. The funds he invests in will charge anything up to another 1.5%, call it 1%. And the SIPP or ISA platform may well charge anything up to maybe another 0.5%. So, I make the total annual charges to your pot maybe 2.5 to 3%.

When you retire, it is commonly thought that the maximum "safe" draw down % each year is 4% or maybe less. And you pay income tax on your SIPP derived income. The tax and the charges aren't leaving an awful lot left out of that 4% draw down are they?

[youngguy]

Seriously, you don't need to know much about funds. Stick the money in World Index tracker and sit back to wait for pot to grow and very low cost. Or, stick the money in a long time respected unit/investment trust, then sit back and wait for the pot to grow. Simples. IFA's want you to think it is dead complicated, don't they?

See those words there..... Tracker, unit ,oeic etc

I don't know what any of them mean!
Time to get reading methinks

[Fred Bloggs]

See those words there..... Tracker, unit ,oeic etc

I don't know what any of them mean!
Time to get reading methinks

Look for the free SIPP and ISA downloads available at any fund supermarket website. Hargreaves Lansdown's guides are probably the best starting point. You will quickly be up to speed with the basics.