Not sure where ‘day trading’ comes into this.
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Ooooohh, really don’t want to get drawn too deeply into that one. However in my experience the FCA number is not far off the mark but could be considered a bit light
Start to finish, DB advice takes us c.30 hours minimum. Usually longer all in. So make of that what you will.
I should say though that we don’t actively look for these and if anyone we don’t already know approaches us asking us to look at one of these for them, and that’s it, then we’re not going to take it on. Any DB work is usually part of something broader and fees will have been agreed beforehand for the whole job.
Well, decide whether to stay in investments X, Y and Z or get out of them.
Which can change on a daily/weekly/monthly/annual basis.
@Jamiewednesday, roughly on average, when you turn up to someone’s house and they’re aged 55, how much pension and savings do they have?
Hah! At the moment I’m not showing up at anyone’s house…
I don’t personally take on many brand new people (across the firm we don’t go looking for new clients, relying on referrals for the most part). Those new ones that I do see will likely be referrals from my existing clients and typically in a similar ballpark, so with liquid assets between £500k and £5M, plus property/ies. Though it can be less and if it’s a personal referral will take it on without quibble.
We do have clients with less than these numbers but they tend to be younger, so we match younger advisers to them as people stay with us for years. Until they die frankly.
We also have clients with much larger sums under management, however they tend to have the MD’s looking after them or a couple of advisers who have been here longer than I have, especially if they’re famous!
Hmm, not how I understand day-trading.
If you’ve got (sufficient) funds there’s no reason an IFA couldn’t invest on your behalf and deliver an income to you with no active management on your part. At a price.
The advantage of this (over a DB pension) is that the funds are still preserved at your death and in your parents’ example if your father died then your mother’s income would be preserved rather than halved as is common with DB schemes.
One of the reasons I was keen to take my DB as a transfer was to have this flexibility and as I understand it the funds held in a SIPP can be passed on to your inheritors outside of your estate so in my case my son and daughter could receive a tax free boost to their pension funds on my (or my wife’s) death and this can seemingly be tax free. In any case whether it’s tax-free or not at least my pension wouldn’t half-die with me and fully die with my wife.
Yes, DC pensions are free of inheritance tax and, if you don’t spend it all first, it is transferred to your nominated beneficiaries on death.
No tax at all on death before 75, if you die after 75 then their drawings from the funds are treated like a regular ‘pension’ income for income tax purposes.
This essentially helps you to think of this as a dynastic pension fund to help out spouse and kids especially, with fewer worries about them having little to retire on themselves. Unlike, as you say DB or annuity income which stops when you do, save any built in spouse percentage.
That’s an excellent argument, and one strongly in favour of getting some (or all) money out of some pensions for some people.
A tax free lump sum does the same thing, so it’s a question of whether to try to get the whole amount or the tax free lump sum.
And part of that either way is working out who will manage the money when you become incapable of doing so - so, yes, FPAs, etc.
One counter issue is what tax liabilites could eat into the lump sum - and what rules there are (and will be in future) on how having that money alters your right to get free NHS medical help.
Ah all big stuff then. I keep reading in the press, the average pension pot is £62,000, which to me is unbelievable.
Who else?
It could well be the average. Lots of people only have little amounts in DC schemes almost by accident and usually through a few years through work and perhaps some in DB too.
Even then, the more well heeled investors were often not keen when, despite 40% relief say, they were more or less obliged to sell down their holdings only to take an indexed annuity at a rate of less than 3% p.a., even lower rates in their fifties, which then died with them!
Only since the advent of pension freedoms and then workplace pension contribution rules have these really been ticking up for the majority.
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Well, you just came across as a bit rude is all, implying that what I thought was objective and helpful commentary to the questions asked was somehow geared towards my own benefit.
I’m surprised it’s that high. Easy to forget that the majority of contributors on forums like this are hardly representative of the average working (or retired) man. Some of the figures bandied about are enough to make your eyes water!
The tax free lump sum (if taken) would still be subject to inheritance tax. Also, if the tax free cash is not needed for spending (and hence invested instead), it would be outside the pensions tax shelter.
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NHS would be expected to cover medical costs still. Welfare costs are means tested and how your pension is treated within this depends on how it’s provided/used.
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@JimDog I think you’re totally against any risk and that’s fine, but investments don’t have to be too risky. Plenty of safe long term options.
Are all your future scenarios that you live perfectly healthy until you’re 90, receive a comfortable monthly income and then die? Flexibility gives you the option to spend £30 grand to help your health issue at 70 you didn’t cater for. To have a blast in the final 12 months of your life, etc…
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I’ve read much less in the (recent) past - around 30k.
But it isn’t that important what’s in a fund when you’re 25 or so and I would anticipate the young drag the average down.
I’ve recently read the average ‘pots’ of those aged 55-65 was just a little over 100k.
Your remarks were an attempt to justify milking money from customers forced into your arms by a system many find nothing short of iniquitous. It’s a closed shop designed to provide IFAs with a captive market. My pension, my money, I should be free to decide precisely what to do with it without being forced to line your pockets. If you think that’s rude you need to develop a thicker skin.
No. It wasn’t. You are mistaken.
If you read my posts, you will note that this is a line of business that I/we don’t actively seek. We have considered not continuing with DB advice but felt this would be inappropriate as some clients do ask us to look at these on their behalf and we would not want to say “No, we can’t do that for you…” There is also the factor that we feel we do a very good job for people who ask. We are not convinced that all advisers are the same.
I do agree with you here. I think the FCA have got this wrong. IMO, they should strongly suggest people take advice on the issue and offer them some kind of direct assistance but not force them to do so. Some people will make poor decisions as a result but they do that anyway.
I’m asking no-one to line my pockets. I have no desire to advise anyone on the forum, though I do find it hard to resist the urge to offer assistance when it’s asked for, or address some of the illogical or mistaken notes I see posted. After all, it is what I do and have been doing for decades. Further, as a salaried employee, with a flat annual income paid to do my job with zero targets, zero bonuses and zero commissions attached, no-one at all will be ‘lining my pockets’.
Clearly, you feel differently than I. Though having been doing this for over 30 years now, I’m used to different opinions. Even those from people who feel the only correct belief is their own.
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A financial puzzle:
My friend is 56, has a legacy DB pension from a former employer. She plans to carry on working and building her current (DB and DC hybrid) work pension until she’s 66.
She must decide on her legacy DB pension between:
Option 1: She can take that legacy DB pension no later than when she’s 60 in 2024 in 38 months time. Without lump sum it’s £13.4k p.a.
Option 2: Or take it now ‘early’ at £12k p.a. with no tax-free lump sum.
Option 3: Or take it now ‘early’ at £9.4k p.a. with tax-free lump sum of £63k.
An actuary would expect her to live until she’s 82 in 2046, and her (very poorly paid) husband to live until he’s 87 in 2067. He gets half of her pension if she dies.
Which option has the best NPV?
(I’m useless at spreadsheets!)
NOTE:
The commutation factor used by the pension admin for the above calculations was 23.5
The pension is linked RPI.
She is not considering a non-increasing pension option.
A table of commutation factors for the legacy DB pension is:
| Age | Increasing | Non-Increasing |
|---|---|---|
| 56 | 24.0 | 16.1 |
| 57 | 23.4 | 15.8 |
| 58 | 22.8 | 15.6 |
| 59 | 22.2 | 15.3 |
| 60 | 21.6 | 15.0 |