Financial retirement education (on YT or elsewhere)?

Lounge
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Investment Management Regulatory Organisation, which didn’t really regulate. Back in the 80/90s, there were several regulators (more trade bodies?) across the investment landscape, and things were going wrong in the post ‘big bang’ investment environment of ‘market deregulation’. At times, it was like the wild west, with various scandals.

Unfortunately, enhanced regulation still hasn’t protected some vulnerable parties e.g. where coal miners and some others (steel workers) have had their pensions fleeced by advisers.

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I remember the good old days of FIMBRA ( Flip it, my brokers run away ) other four letter words other than Flip are available

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The use of IFA’s, their recommended funds and subsequent charges compounded are a very expensive way to invest over the longterm and seriously handicap your returns.
For us novice investors, Vanguard provide a managed service for their low fee Index trackers - all in for 0.6%. Research suggest that Index funds perform as good as, or better over the long term than active Fund managers for a fraction of the cost.
PensionCraft on Youtube is informative and might aid your research.

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Thank you Toto.

I will have a look at this.

Just watched his video on the current US AI based tech bubble (those weren’t his exact words) and he does seem like a very sensible analyst and advisor.

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I used to work in employee benefits and my employer provided a supermarket sweep approach with oodles of funds and little in the way of education or information on how the funds might be used . Neither did the EB consultancy , these days thoroughly glad to be out of it all

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I think thats a 2nd ‘vote’ in favour of using HL - or someone similar - and doing it yourself. Encouraging to see a figure quoted. I will work something out for mine, I think…

There are others, besides HL, who are no doubt similar.

YMMV.

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I loosely follow a US blogger Mr Money Moustache who promotes FIRE: Financial Independence Retire Early. He is very accessible and keeps it simple with some key tips of basic principals to follow. Although he promotes a degree of living and saving, he does have a high-end hi-fi system too!

Anyway, my brother is an accountant and he has developed a fancy “retirement spreadsheet” to track income and spending based on average rates of return and spending, and you can then add these FIRE principals into it.

One of the basics I have followed is to invest in a range of investment funds to spread risk, through several providers that have low management fees, along with cash term deposits in the bank. We have two fund providers and four risk profiles (conservative, balanced, growth and high growth) and cash, along with two KiwiSaver funds (this is a state investment scheme, but you can’t draw from it until you are 65). The idea is to balance risk over the short term (needed in the next year or two) and long term (to draw down in retirement as a top up to the state pension). As I work part time and have 7 years before the state pension, I ring fence a “retirement pot” and aim to live “within the means” with surplus going into lifestyle things (mostly holidays and travel). You can then track that through the “retirement spreadsheet”, but need to recognise that its a long term plan and there will be swings and roundabouts that might get hair-raising along the way.

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It’s interesting you say that. My son works for an investment management company and recommended that we use a global tracker fund, as the fees are so low. Managed funds need to make a lot more in returns before their much higher fee is offset.

We had the fund for a couple of years while interest rates were rock bottom but as soon as they increased it seemed better to have the money in cash ISAs.

We have LGPS pensions which are index linked and don’t need worrying about. So long as our savings do reasonably well I’m not worried about squeezing every last return out of them. They are just there in case we face large lumpy cost in the future.

The OP’s position seems similar to ours. With most of the pension in the USS, index linked like the LGPS, it only seems worth engaging an IFA if there are hundreds of thousands outside of the pension that need looking after. The most important thing these days, with higher interest rates, is getting money into ISAs to avoid paying tax on interest.

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Hi Jim,
I/we moved all of our investments across to HL about 30 years ago for ease of visibility. We use them for “execution only” and make all of the decisions ourselves.
We chose to go with Investment Trusts rather than Unit Trusts about 40 years ago for lots of reasons, the possibility of a “Neil Woodford” with open ended trusts I did not like.
The charges we pay are reasonable, being capped: £45/year for each £x100k ISA and £200 for the £x100k SIPP, so less than £300 per year for the best part of £1M.
When it comes to which IT to invest in, I advise my friends and son to pick for themselves. There are quite a few in the FT350, you can download the annual reports from HL and read them. This might sound an arduous task but once you have read one or two, you will see that they all use the same format, common descriptions, etc. so quite easy. Look out for: Chairmans report, Fund managers report, the mix of investments, the boards renumeration and importantly the historic “total returns”.
Most of the ITs that I invest in have been in operation for about 100 years, so there is some real history.
I’ll list here the EPIC codes of some of my ITs (this is NOT a recommendation): CTY, FCIT, MUT, MYI, SMT, TMPL, WTAN.
Up to retirement all investments were set for dividends to reinvest, after retirement I switched that to pay out and that alone provides a very comfortable income for us. So the only time that I have sold any investments are to rebalance the portfolio and to give the kids and grandkids a boost to their ISAs.
So most of our underlining investments remain as an emergency fund for whatever comes next, probably medical.
Regarding my day job; I somehow found myself as the head of design for a major aircraft systems provider, so for that I needed to be OK at sums, spread sheets and common sense. Due to our investments and not an exorbitant pay we were able to retire at 55 and I became a roving consultant as the mood took me (I was very expensive, which meant that I didn’t get offered rubbish jobs and they could not afford me for more than a few weeks at a time - perfect!)
Paul.

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I also recommend PensionCraft but also check out Rob Berger he’s US based but I find his videos are really worth watching and make a lot of sense.

I use a single global passive index and bond fund with Vanguard. I don’t ever need to worry about trying to beat the market and swapping funds to the next best thing as very few fund manager can beat a passive fund.

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HH - if a person has an opportunity to access a tax-free commutation sum, this is where independent advices and suggestions can help, as it isn’t the easiest thing to rationalise and any decision will be informed by so many things. It appears some schemes assist in helping people make an informed choice, where as others won’t go near being seen to provide ‘advice’.

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Commutation isn’t something that was relevant to me, as anyone taking money out of the LGPS has to be completely barking, but if it is an option then yes, advice from an expert is potentially useful.

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You’re touching on some of the issues & challenges which may result e.g. (and this is non-exhaustive!), and expressed simply as points, which I’m sure you will join-up (I hope!):

1- Much depends on the nature of the pension entitlements in play, be this Defined Benefit (DB), Defined Contributions (DC), AVCs, SIPP e.g. what can you/cannot do.

2- You must understand the nature of the pension offering, especially DBs, and the benefits & downsides relative to each one, plus the tax implications of each route (for the pension monies themselves and your own income tax position).

e.g. with some DB schemes, they will pay 5 years of pension if you die early, often have a survivor’s entitlement (much reduced of course), probably offer a commutation option (25%?) at the cost of reducing the annual pension. Annual increases may be capped at CPI/max 4/5%? This is where details matter.

3- We all know UK tax rules and application have changed significantly since 2014(ish), with the introduction of LTA – and this aspect remains a mess.

Is taking a 25% commutation in tax-free (yippee!) cash the right thing – well, it depends on so many things e.g. what the residual pension is, what can you do with the redeemed cash (ISAs?), how will all of this affect your tax position. There are so many considerations here.

If you have a SIPP then there are a plethora of other considerations too.

@JimDog – if you are thinking of a scenario where there could be material investments which cannot be tax-shielded in ISAs, here’s some thoughts:

a- can you shield these over time e.g. use the £20k annual allowance over x years - but beware the limit changing adversely/even being abolished!
b- perhaps target growth structures over income, as you probably won’t want ‘income’ aggravating your personal tax profile?
c- do you even need the capital? Could you contemplate passing down to any kids now (s/t all considerations)?
d- you’ll need to have a heavy focus on CGT allowance, which is now only £3k p.a. (in UK), which will mean recycling investments to manage to this.
e- if you exceed BRT level, say ~£52k in declarable personal income (base income/non-ISA interest/property income/dividends et al), then you may be advised to consider tax-mitigating moves like Venture Capital Trusts (VCTs), which can be used to recycle capital, but with risks.

This is why using an IFA, at least at the outset, can assist.

Things get even more complicated when you consider State pension entitlements too, on top of any other incomes. You’ve probably seen recent media articles about the ‘frozen allowances’ pulling more pensioners in to the tax net, with an increasing picture of tax capture from this segment of society e.g. in practicable terms, this can mean that while you set everything up now to avoid paying 40% (or not exposed to much of it?!), this net will tighten as (say) DB and State pension payments increase.

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Excellent synopsis.

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Expectations would be in line with what the current market is doing. For instance, during the recent long bull market I was expecting a higher percentage return. I get a detailed monthly statement from him, so it is very easy to track portfolio performance. I’m very happy with maintaining an average yearly return of 8 or 9%, spread across a multitude of very safe investments. This will more than triple every 20 years with reinvested dividend yields.

Discussing underperforming assets and possible new investment directions or strategies is exactly what him and I do on a regular basis, say, quarterly at least.
Fees are approximately 1.3% per annum which is an overall management fee with no charges for any trading fees incurred by them, so we are not trying to minimize the amount of buying or selling.

By my calculations, the portfolio underperformed for 2023 and we will be discussing this shortly. I put this discussion off for a bit as the returns have been excellent over the last four or five months.

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Don’t know where you live , but can really recommend Sheavyn Associates Wealth Management in Wetherby, Yorkshire.
Very helpful and proactive as well as friendly.

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Returns are a fluctuating entity and performance is easily trackable on a quarterly or biannual basis. Also very calculable over the full period for which one’s IFA has been in employed for the service. For me that’s about 10 years.
I think maybe people get confused about the fact that one’s IFA is an employee. I think many times they are put on too high of a pedestal by the investor.
I had over a hundred employees when I sold my business, so I’m very used to the employee/employer relationship. Good performance is just a requirement.

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A good way of maintaining one’s portfolio once you get to the point where you are drawing from it on a regular basis is to be invested in stocks and funds that provide a good dividend yield. If you can stick to stocks that yield 3.5 to 6.5%, then a four or five percent average yield is doable. This is really the only portion one should draw from, so that the constant market fluctuations don’t concern you as the safe stocks that you’re invested in will almost always be higher at a later date. This also forces one to live within one’s means, which is rarely a bad thing.
This also allows the portfolio to keep up with inflation and then some.
The stable stocks that I’m invested in, also don’t dip as much as the market does in a pullback, but even when they do, I know they’ll be back up again soon.

Having a portfolio that one isn’t constantly worried about is very important when you’re retired.

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Thanks David, that’s useful detail.

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These are very helpful posts, David.

If possible, please say roughly how many companies you own stock in directly?

And what the proportion split between stocks and funds is?

Do you have bonds in there too?

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