Reply to: Looking for some advice around pension/salary sacrifice

[Lance]

I know very little about this, but I believe that if you have several pension pots there’s a scam you can do where you take the money out of one pot and Deposit it in another for free money.

So unless you think listening to a professional is better than some random idiot on the internet, don’t consolidate.

the advantage of consolidating is that once you have found a pension pot with low fees, there's no point having different pots, with different fees scattered around. So find a good one and consolidate all that are not defined benefits.
You want management fees of well under 1% and a lot of older pensions could have fees of more than 2%.

This is where an IFA adds value. Not in selling you their pot but in advising. This advise will cost money.

[hugebrain]

So I spoke with an IFA this morning.

Their advice for me was to consolidate my 3 pension pots

I know very little about this, but I believe that if you have several pension pots there’s a scam you can do where you take the money out of one pot and Deposit it in another for free money.

So unless you think listening to a professional is better than some random idiot on the internet, don’t consolidate.

[Whitelime]

So I spoke with an IFA this morning.

Their advice for me was to consolidate my 3 pension pots into one pot with another SIPP provider, stop my NEST pension, and Salary Sacrifice into the new SIPP.
Setup an S&S ISA, and a Lifetime ISA that they would manage. Not sure which funds they use, they just stated that on average over 10 years they have compound interest of 15%.

I definitely found it useful as I haven't got a clue about any of this, but they want £1500 to set up the SIPP and the ISA's and move my pensions for me.

I find this to be quite expensive, but after speaking to colleagues £1500 is the average?

Is it worth doing? I can do 90% of that myself I'm assuming the benefit they have is knowing which funds to invest my money into.

Easy enough to setup a SIPP yourself for free and invest in a global index tracker (something like Global All Cap). At your age you should be 100% equities in your SIPP, anyone who says otherwise is crazy. ISA is a different story depending on when you think you'll need the money. People generally say 100% equities is for money you won't need in the next 10 years. If you think you'll need it in a year or 2, stick it in Premium Bonds and hope you win big.

LISA very much depends on your own situation with regard to purchasing a house.

Seriously though, save your £1500. When you setup a SIPP and/or ISA, they'll gladly do all the work transferring your old accounts for free.

[Fred Bloggs]

I'll contact them and find out what they're talking about and post back here. I have no idea what they're basing it off of.

That's because at the moment you don't know what questions to ask. Nor do you know the expected answers. You have a lot of catching up to do if you aren't going to present yourself as the salesman's next easy meal ticket.

[daleric]

If I'd blown all my pension on Bitcoins in 2012 then I'd have done very well as well.
The point being, which I think you're agreeing with, is to aim for a realistic and achievable safe(ish) growth rate. Anything over 8%* should be considered risky and onl;y a portion of the fund should go into that.


* - Caveat: As inflation increases the returns may well go up and 8% may well be considered safe in 6 months. If an IFA tells me they can get 15% year on year growth in my pension I'd find a new IFA.

I'll contact them and find out what they're talking about and post back here. I have no idea what they're basing it off of.

[Fred Bloggs]

If I'd blown all my pension on Bitcoins in 2012 then I'd have done very well as well.
The point being, which I think you're agreeing with, is to aim for a realistic and achievable safe(ish) growth rate. Anything over 8%* should be considered risky and onl;y a portion of the fund should go into that.


* - Caveat: As inflation increases the returns may well go up and 8% may well be considered safe in 6 months. If an IFA tells me they can get 15% year on year growth in my pension I'd find a new IFA.

All your points are valid enough, yes.

I am really stressing that nobody should be having any conversations with anyone until they have self educated themselves enough to know exactly the questions they need to ask. It has never been easier to do so. At that point, unless the individual is terminally lacking in confidence, they are unlikely to need an adviser at all. But if they do, then at least it is a fully informed decision they are taking and they are much less likely to fall prey of an SJP salesman.

[Lance]

Ahem....... Not if you managed your own money and bought Fundsmith. However, very, very few, if any, advised clients would have done that.

I did

If I'd blown all my pension on Bitcoins in 2012 then I'd have done very well as well.
The point being, which I think you're agreeing with, is to aim for a realistic and achievable safe(ish) growth rate. Anything over 8%* should be considered risky and onl;y a portion of the fund should go into that.


* - Caveat: As inflation increases the returns may well go up and 8% may well be considered safe in 6 months. If an IFA tells me they can get 15% year on year growth in my pension I'd find a new IFA.

[Fred Bloggs]

I'd want to see evidence of that.
I'd also want to see how many funds they managed that lost money. Outperforming the stock market is a rare skill indeed, mostly smoke and mirrors, and often ends in tears (re: Woodford Close to £124m still trapped in Woodford fund - FTAdviser.com )

Bluntly. 15% is too high to be anything other than high risk, and not suitable for a pension IMO.

Ahem....... Not if you managed your own money and bought Fundsmith. However, very, very few, if any, advised clients would have done that.

I did

[Fred Bloggs]

IFAs are heavily regulated these days. And you can just pay them £££ for advice and put your money elsewhere.
20 years ago they were mostly crooks, but they have to explain all their commissions now.

They are qualified to provide financial advice, unlike everybody on here.

The fly in the ointment, and it is a very common misconception, people talk to firms like St James Place and the other sharks who style themselves as "wealth managers". Often, the sales script is deliberately skewed to give the impression the potential client is talking to an IFA when in fact, they are talking to an FA. An FA is otherwise known as a salesman. Usually tied to that company and it's in house investments only. The potential client has to work hard to ensure they don't fall into the trap of engaging a salesman over a true IFA. I have to say, that anyone who falls into the hands of a wealth management company really is making a big mistake. Unfortunately, it's usually far too late that the client realises his mistake. Of course, the SJP's of the world are working very hard to hide this and in fact it's mostly the salesman's wealth that's being managed rather than the customers.

Be very careful out there. It really is all about self education and making decisions from a position of knowledge rather than ignorance.

[Lance]

Sorry, I should've stated that it's a 15% growth average per year on your investment. At least that's how I received it on the phone call.

I'd want to see evidence of that.
I'd also want to see how many funds they managed that lost money. Outperforming the stock market is a rare skill indeed, mostly smoke and mirrors, and often ends in tears (re: Woodford Close to £124m still trapped in Woodford fund - FTAdviser.com )

Bluntly. 15% is too high to be anything other than high risk, and not suitable for a pension IMO.

[daleric]

Compounded interest over 10 years of 15% isn't great (it's terrible). It's less than 1.5% yearly interest. You'll get better than that with a fixed terms saving account.

I wouldn't pay anyone to setup a SIPP. The point of a SIPP is it's self-administered. You can choose a fund or funds that are managed by the fund manager with very low costs. Look at ii.co.uk for Vantage funds and UBS S&P 500 tracker. I've got c. 40% growth on the S&P tracker in under 4 years.

Tracker funds tend to outperform managed funds and are lower cost.

Sorry, I should've stated that it's a 15% growth average per year on your investment. At least that's how I received it on the phone call.

I agree with your point about the SIPP, I feel like there's a lot of this I could do myself but wasn't sure where to start at all which is why I engaged with an IFA.

Also regarding my pension, didn't have a clue.

[Lance]

So I spoke with an IFA this morning.

Their advice for me was to consolidate my 3 pension pots into one pot with another SIPP provider, stop my NEST pension, and Salary Sacrifice into the new SIPP.
Setup an S&S ISA, and a Lifetime ISA that they would manage. Not sure which funds they use, they just stated that on average over 10 years they have compound interest of 15%.

I definitely found it useful as I haven't got a clue about any of this, but they want £1500 to set up the SIPP and the ISA's and move my pensions for me.

I find this to be quite expensive, but after speaking to colleagues £1500 is the average?

Is it worth doing? I can do 90% of that myself I'm assuming the benefit they have is knowing which funds to invest my money into.

Compounded interest over 10 years of 15% isn't great (it's terrible). It's less than 1.5% yearly interest. You'll get better than that with a fixed terms saving account.

I wouldn't pay anyone to setup a SIPP. The point of a SIPP is it's self-administered. You can choose a fund or funds that are managed by the fund manager with very low costs. Look at ii.co.uk for Vantage funds and UBS S&P 500 tracker. I've got c. 40% growth on the S&P tracker in under 4 years.

Tracker funds tend to outperform managed funds and are lower cost.

[daleric]

So I spoke with an IFA this morning.

Their advice for me was to consolidate my 3 pension pots into one pot with another SIPP provider, stop my NEST pension, and Salary Sacrifice into the new SIPP.
Setup an S&S ISA, and a Lifetime ISA that they would manage. Not sure which funds they use, they just stated that on average over 10 years they have compound interest of 15%.

I definitely found it useful as I haven't got a clue about any of this, but they want £1500 to set up the SIPP and the ISA's and move my pensions for me.

I find this to be quite expensive, but after speaking to colleagues £1500 is the average?

Is it worth doing? I can do 90% of that myself I'm assuming the benefit they have is knowing which funds to invest my money into.

[Lance]

You are going to be disappointed with an ifa! Just like people here are upset with their accountants.

the Ida will suggest investments that net them commissions .. just be aware

IFAs are heavily regulated these days. And you can just pay them £££ for advice and put your money elsewhere.
20 years ago they were mostly crooks, but they have to explain all their commissions now.

They are qualified to provide financial advice, unlike everybody on here.

[Fred Bloggs]

You are going to be disappointed with an ifa! Just like people here are upset with their accountants.

the Ida will suggest investments that net them commissions .. just be aware

Absolutely. Similar experience as dealing with double glazing salesman. Far better to self educate and make your own decisions.