Pensions

124

Comments

  • TheBigBean
    TheBigBean Posts: 20,551

    You are able to properly research the 4,000+ funds on your own?
    Really?

    And with respect, I suspect the real answer to many of those questions is actually no. You only think you do.

    However carry on.

    I do agree that some financial education would be hugely beneficial and that the regulatory framework is excessive , but have no idea what the 'sub 2 comma crowd' is.

    Do you have any views on the question I asked (interactive investor)? That would be more helpful than judging my expertise on other questions.

    Presumably "sub 2 comma crowd" means having less than £1,000,000


    Interactive Investor are direct to consumer so I have no views on them, or experience of them. Sorry.
    I find this surprising. I'm far more interested in an IFA's view on cost effective ways to invest in funds than their view on the funds themselves. I assume that this means you don't advise any of your clients to use interactive investor even if this might be the cheapest option for them? The difference in costs is quite significant e.g. Standard Life would charge someone with £1m in their pot around £4,000 per year for potentially the same as interactive investor are charging £150.

    II don't deal with IFAs and if we can't access their platform why would we use them? We can't obtain valuations and our investment partners can't manage portfolios on the platform. So there's an information block. That may be a factor in lower charges as they don't provide the tech for the various feeds and trading options required elsewhere.
    An adviser simply would never use a D2C platform. They're aimed at the DIY crowd.

    As with many things, it's all about relationships. Client adviser and adviser provider.

    I don't try to select funds - I, like you, don't have the qualifications to do that, so I outsource the portfolio management to those with those skills and capabilities. An who don't have an emotional tie either.

    II don't deal with IFAs and if we can't access their platform why would we use them?


    Because it might still be better for your client.

    I don't try to select funds - I, like you, don't have the qualifications to do that, so I outsource the portfolio management to those with those skills and capabilities. An who don't have an emotional tie either.


    You may not believe in efficient markets to the same extent as me, but you should acknowledge that it is a view held by many. It follows from this therefore that I don't believe in the portfolio management skills you refer to. I am happy for others to disagree, but I think laughing at people who hold this view is a bit off.

  • Dorset_Boy
    Dorset_Boy Posts: 6,915
    Large cap markets are pretty efficient but you then have the issue of a large cap US tracker having been a tech fund, or a FTSE100 tracker being effectively a hybid oil, commodities and financial services fund.

    Small cap and emerging markets are far from efficient.

    And then there's fixed interest. And how trackers deal with income distributions generally.

    Trackers have a place as part of a portfolio but are not the sole solution.

    If II's admin is effectively horrendous / impossible for an IFA, why would we even try. Client may have a low cost platform but that might be compensated for by having to charge a higher fee by the adviser.

  • TheBigBean
    TheBigBean Posts: 20,551

    Large cap markets are pretty efficient but you then have the issue of a large cap US tracker having been a tech fund, or a FTSE100 tracker being effectively a hybid oil, commodities and financial services fund.

    Small cap and emerging markets are far from efficient.

    And then there's fixed interest. And how trackers deal with income distributions generally.

    Trackers have a place as part of a portfolio but are not the sole solution.

    If II's admin is effectively horrendous / impossible for an IFA, why would we even try. Client may have a low cost platform but that might be compensated for by having to charge a higher fee by the adviser.

    I'm sure you have happy clients who believe all this. I'm not trying to dissuade them from their current approach. However, it is not for me.
  • rick_chasey
    rick_chasey Posts: 72,517
    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?
  • Dorset_Boy
    Dorset_Boy Posts: 6,915

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    If she has no earned income she can contribute £3,600 pa gross and will get 20% tax relief on that, so a net contribution of £2,880.
    You can also do the same for your daughter.
  • TheBigBean
    TheBigBean Posts: 20,551

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    Make sure she is getting NI credits from your daughter.
  • rick_chasey
    rick_chasey Posts: 72,517

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    If she has no earned income she can contribute £3,600 pa gross and will get 20% tax relief on that, so a net contribution of £2,880.
    You can also do the same for your daughter.
    And if it’s more it’s capped as 20% of the first 3600?
  • Dorset_Boy
    Dorset_Boy Posts: 6,915

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    Make sure she is getting NI credits from your daughter.
    Yes, which given how much you are earning means she is probably not receiving any child benefit.
  • rick_chasey
    rick_chasey Posts: 72,517
    Thanks. Yes no CB but we do the claiming thing for NI
  • surrey_commuter
    surrey_commuter Posts: 18,866

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    On a slow Friday afternoon and just doing personal finance stuff and this is intriguing me.

    If you don't mind me asking have you maxed out your £60k or am I missing some other benefit to using the wife's allowance?

    You may already have maxed out yours and hers ISAs but if not at 20% is it not better to put the money in there as you will be getting relief on a larger sum more than likely at the higher rate?
  • rick_chasey
    rick_chasey Posts: 72,517
    edited May 2023

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    On a slow Friday afternoon and just doing personal finance stuff and this is intriguing me.

    If you don't mind me asking have you maxed out your £60k or am I missing some other benefit to using the wife's allowance?

    You may already have maxed out yours and hers ISAs but if not at 20% is it not better to put the money in there as you will be getting relief on a larger sum more than likely at the higher rate?
    Possibly. Challenge is getting the wife to actually invest it in something rather than have it sit there. So if I’m being realistic putting it in a pension where it will at least accumulate over the next 30-35 years and we can’t touch it is not necessarily the worst idea.
  • Stevo_666
    Stevo_666 Posts: 58,383

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    As mentioned above, better for you to put it into your pension and get the relief at your marginal rate.

    I like the fact that you are tax planning, Young Jedi ;)
    "I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]
  • rick_chasey
    rick_chasey Posts: 72,517
    Stevo_666 said:

    Anyone know: my wife is a stay-at-home mum > if we top her pension up can we claim some tax relief back?

    As mentioned above, better for you to put it into your pension and get the relief at your marginal rate.

    I like the fact that you are tax planning, Young Jedi ;)
    Thanks.

    I think it's important my wife has some money in her name, so that's why I was making the enquiry.
  • pangolin
    pangolin Posts: 6,304
    Anyone got strong opinions on this?

    https://www.gov.uk/government/news/chancellors-mansion-house-reforms-to-boost-typical-pension-by-over-1000-a-year

    A vocal bloke at work is making a fuss about "the government deciding to raid citizen pension pots to provide venture capital funding to start-up companies ... incentivised by exorbitant fees" i.e. the announcement allows the pension providers to charge more, hence they have signed up.
    - Genesis Croix de Fer
    - Dolan Tuono
  • rick_chasey
    rick_chasey Posts: 72,517
    pangolin said:

    Anyone got strong opinions on this?

    https://www.gov.uk/government/news/chancellors-mansion-house-reforms-to-boost-typical-pension-by-over-1000-a-year

    A vocal bloke at work is making a fuss about "the government deciding to raid citizen pension pots to provide venture capital funding to start-up companies ... incentivised by exorbitant fees" i.e. the announcement allows the pension providers to charge more, hence they have signed up.

    UK does typically invest much less in growth-stage companies, and growth-stage companies' access to capital is one of the areas lots of experts have pointed at as a real brake on British growth.

    UK has one of the most entrepreneurial economies yet some of the worst developed world performance when it comes to scaling those up.

    So that's what's behind it. American companies can regularly go to the big pension funds to get capital etc. That doesn't happen in the UK.


    @surrey_commuter thinks quite little of this proposal IIRC, but he will explain why as I don't fully understand (on me, no him)
  • shirley_basso
    shirley_basso Posts: 6,195
    There is a broader gov't strategy that SMEs are missing out on investment and they're right.

    They want to use pension scheme money for private equity type deals, too.

    https://www.gov.uk/government/consultations/local-government-pension-scheme-england-and-wales-next-steps-on-investments/local-government-pension-scheme-england-and-wales-next-steps-on-investments
  • Pross
    Pross Posts: 40,435
    Feels like it would be high risk / potentially high reward investment?
  • pangolin said:

    Anyone got strong opinions on this?

    https://www.gov.uk/government/news/chancellors-mansion-house-reforms-to-boost-typical-pension-by-over-1000-a-year

    A vocal bloke at work is making a fuss about "the government deciding to raid citizen pension pots to provide venture capital funding to start-up companies ... incentivised by exorbitant fees" i.e. the announcement allows the pension providers to charge more, hence they have signed up.

    I could be the vocal bloke at your work apart from the fee bit.

    I see it as the market has chosen not to allocate resources to these potential investments so the Govt has decided to invest part of your pension pot instead.

    I think these are totally inappropriate for DC (or mature DB) and if a holder of a DC scheme is sophisticated enough to want to do this then they can crack on.

    I passionately believe this is a fvck in disgrace.

    For info I am a DB trustee who sits in rooms with very knowledgeable pension experts and they shake their heads in despair.

    Investing in this stuff is what brought Woodford to his knees so it really is high risk
  • TheBigBean
    TheBigBean Posts: 20,551
    Doesn't sound like a good idea to me. The people's whose money it is are too far away from the investments to understand the risk.

    There's always money for something credible.
  • rick_chasey
    rick_chasey Posts: 72,517
    edited August 2023

    pangolin said:

    Anyone got strong opinions on this?

    https://www.gov.uk/government/news/chancellors-mansion-house-reforms-to-boost-typical-pension-by-over-1000-a-year

    A vocal bloke at work is making a fuss about "the government deciding to raid citizen pension pots to provide venture capital funding to start-up companies ... incentivised by exorbitant fees" i.e. the announcement allows the pension providers to charge more, hence they have signed up.

    I could be the vocal bloke at your work apart from the fee bit.

    I see it as the market has chosen not to allocate resources to these potential investments so the Govt has decided to invest part of your pension pot instead.

    I think these are totally inappropriate for DC (or mature DB) and if a holder of a DC scheme is sophisticated enough to want to do this then they can crack on.

    I passionately believe this is a fvck in disgrace.

    For info I am a DB trustee who sits in rooms with very knowledgeable pension experts and they shake their heads in despair.

    Investing in this stuff is what brought Woodford to his knees so it really is high risk
    As someone who knows much more than me, as I know just enough to be dangerous but that's about it, what is it that makes this so unappealing for UK pension funds but not North American or Scandinavian funds, that do do a lot of investing in this space.
  • shirley_basso
    shirley_basso Posts: 6,195
    I think VC is a very broad term which doesn't really capture the risks.

    If you look at VCTs, for example, the returns are quite good (depending on manager) and relatively low risk. Large cap VCs, I don't really buy into. Having flicked through, it does mention PE (which is always thrown in with VC even though it's not the same) which is lower risk again.

    The problem the government has is a) it wants to invest more in to SMEs but b) deploy capital more quickly, i.e larger investments.

    On the a) it does quite well. unfortunately A and B are not compatible.

    https://www.gov.uk/government/consultations/local-government-pension-scheme-england-and-wales-next-steps-on-investments/local-government-pension-scheme-england-and-wales-next-steps-on-investments

    Provides more detail in sections 3 and 4 about how the investment is being rolled out, mainly through regional asset managers and investment firms.
  • shirley_basso
    shirley_basso Posts: 6,195

    pangolin said:

    Anyone got strong opinions on this?

    https://www.gov.uk/government/news/chancellors-mansion-house-reforms-to-boost-typical-pension-by-over-1000-a-year

    A vocal bloke at work is making a fuss about "the government deciding to raid citizen pension pots to provide venture capital funding to start-up companies ... incentivised by exorbitant fees" i.e. the announcement allows the pension providers to charge more, hence they have signed up.

    I could be the vocal bloke at your work apart from the fee bit.

    I see it as the market has chosen not to allocate resources to these potential investments so the Govt has decided to invest part of your pension pot instead.

    I think these are totally inappropriate for DC (or mature DB) and if a holder of a DC scheme is sophisticated enough to want to do this then they can crack on.

    I passionately believe this is a fvck in disgrace.

    For info I am a DB trustee who sits in rooms with very knowledgeable pension experts and they shake their heads in despair.

    Investing in this stuff is what brought Woodford to his knees so it really is high risk
    I was of the understanding that it was the fact that Woodford was investing outside of his remit, and the lack of liquidity when he was forced to sell up is what brought Woodford to his knees, not the risk.
  • shirley_basso
    shirley_basso Posts: 6,195

    Doesn't sound like a good idea to me. The people's whose money it is are too far away from the investments to understand the risk.

    There's always money for something credible.

    There's a very good reason that institutional investors invest into Private Equity, following their money regularly for subsequent funds. It's a very well understood, generally well behaved asset class with an unjustifiably bad reputation because of high profile transactions / disasters.

    There are a number of specialist asset managers and investors who invest local government money into SMEs (and I am not talking about the guy who stole council money to buy himself a PJ - https://www.bbc.co.uk/news/uk-66340991) with good success.

    It's all about a balanced portfolio as you age. Councils have £360bn FUM (£500bn by 2030) and already pool it to invest in various investment projects. It's not like they are going to select the 5% to go into illiquid invesments from the most elderly pensioners. In much the same way a young pensioner may have lots of high risk assets when they are young, and low risk when old - if Standard Life can do that, then so can the Local Government Pension Scheme.

    Like Woodford - some negative press has put people off the asset class, when DC pension funds are perfect for private equity as there is no need for them to be liquid.
  • TheBigBean
    TheBigBean Posts: 20,551

    I think VC is a very broad term which doesn't really capture the risks.

    If you look at VCTs, for example, the returns are quite good (depending on manager) and relatively low risk. Large cap VCs, I don't really buy into. Having flicked through, it does mention PE (which is always thrown in with VC even though it's not the same) which is lower risk again.

    The problem the government has is a) it wants to invest more in to SMEs but b) deploy capital more quickly, i.e larger investments.

    On the a) it does quite well. unfortunately A and B are not compatible.

    https://www.gov.uk/government/consultations/local-government-pension-scheme-england-and-wales-next-steps-on-investments/local-government-pension-scheme-england-and-wales-next-steps-on-investments

    Provides more detail in sections 3 and 4 about how the investment is being rolled out, mainly through regional asset managers and investment firms.

    I don't think I would characterise VCTs or EISs as low risk. One EIS fund was written down to almost zero which I don't think is ideal for a pension fund.
  • shirley_basso
    shirley_basso Posts: 6,195
    I didn't mention EIS and I said relatively low risk, in the context of talking about VC.
  • TheBigBean
    TheBigBean Posts: 20,551

    I didn't mention EIS and I said relatively low risk, in the context of talking about VC.

    But not in the context of pensions which I thought the discussion was about.
  • shirley_basso
    shirley_basso Posts: 6,195
    You shouldn't really want your pension to be low risk (relatively or absolutely) all of the time, especially when you are younger.
  • pangolin
    pangolin Posts: 6,304
    My default aviva pension is 20% bonds despite being ~30 years from retirement. This feels overly cautious.
    - Genesis Croix de Fer
    - Dolan Tuono
  • TheBigBean
    TheBigBean Posts: 20,551

    Doesn't sound like a good idea to me. The people's whose money it is are too far away from the investments to understand the risk.

    There's always money for something credible.

    There's a very good reason that institutional investors invest into Private Equity, following their money regularly for subsequent funds. It's a very well understood, generally well behaved asset class with an unjustifiably bad reputation because of high profile transactions / disasters.

    There are a number of specialist asset managers and investors who invest local government money into SMEs (and I am not talking about the guy who stole council money to buy himself a PJ - https://www.bbc.co.uk/news/uk-66340991) with good success.

    It's all about a balanced portfolio as you age. Councils have £360bn FUM (£500bn by 2030) and already pool it to invest in various investment projects. It's not like they are going to select the 5% to go into illiquid invesments from the most elderly pensioners. In much the same way a young pensioner may have lots of high risk assets when they are young, and low risk when old - if Standard Life can do that, then so can the Local Government Pension Scheme.

    Like Woodford - some negative press has put people off the asset class, when DC pension funds are perfect for private equity as there is no need for them to be liquid.
    I look at it in the context of things like CDOs. There are many reasons they fell apart, but one of them is that investors had no idea what they were investing in and instead chose to trust all the managers along the way.

    If you look at this year, tax avoiding funds have continued to raise funds whereas ones relying on professional investors have not. The upshot is that the tax avoiding funds need to chase suitable investments, and there is a risk they will end up buying junk.

    That level of risk might be appropriate for a small percentage of someone's pension, but I would want it to be heavily regulated.

    Plus, what are all these amazing investments that can't find funding?





  • rick_chasey
    rick_chasey Posts: 72,517
    edited August 2023
    pangolin said:

    My default aviva pension is 20% bonds despite being ~30 years from retirement. This feels overly cautious.

    Might have been a few years ago; read a research note by Morgan Stanley last month put out a note that suggests that, volatility aside, returns in equities will be roughly around the same as bonds over the next few years.

    You never really know obviously.