2024 UK politics - now with Labour in charge
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NEST is the government backed auto enrolment pension. Whilst the ongoing charges aren't too bad, 1.8% of each contribution is taken in charges (to repay the loan the gov made to Nest to set it up) which makes it very expensive for those paying in regularly. Fund range is limited too. So if Nest is your employer's scheme, pay what you have to pay to get your employer's contribution. If you can put more money aside then having a separate pension will probably be better value.
You do not need a Sipp for additional contributions. A personal pension (that's what the 'pp' bit of Sipp stands for, with SI being 'self invested') is likely to be more than adequate espcially for an inexperienced investor. Sipp s may have some (limited) additional functionality, and a very wide fund range, but modern personal pensions offer drawdown in retirement and beneficiaries drawdown in the event of your death.
What you do need is a portfolio that is proactively managed (at portfolio level) within the level of risk you are happy to accept. This means the portfolio is regularly rebalanced, and the performance of the funds that make up the portfolio are reviewed regularly and switchoed out if appropiate. The longer to go to your anticipated retirement date the more risk you can afford to take as what happens in the short term (1-2 years) is not relevant to the situation over 15+ years. But remember, values will fluctuate every day.
For those who don't have the knowledge, the likes of Royal London's Governed Portfolio range are more than adequate, but they aere only available through an adviser.
Placing funds in bank / building society accounts or premium bonds is not investing, it is saving. Such deposit type accounts are pretty much guaranteed to lose you money in real terms over tghe medium and long term at the returns tend not to keep pace with inflation (unless you are an active 'rate tart'). You need to use such accounts for emergencies and short term needs, but not for saving for your retirement. But as Sungod says, make use of your Isa allowances.
In drawdown, every £100k you have can provide an income of around £300 pm with no likelihood of you every exhausting your pension fund.
Hope that is of some help!
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Yes, lots of helpful info in there, cheers DB!
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You do not need a portfolio that is proactively managed. It might perform better. It will cost more. It may be the right decision.
- Genesis Croix de Fer
- Dolan Tuono0 -
If you understand anything about risk management you will know that your view is incorrect. Unless you are able to manage portfolios yourself, research the 1,000s of funds, be disciplined about rebalancing.
OPtherwise it is a few steps removed from gambling.
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Are you counting an index find as proactively managed?
- Genesis Croix de Fer
- Dolan Tuono0 -
An index fund tracks a particular index. such funds can (and in all likelihood) will form part of a pro-actively managed portfolio. Pre the Mag 7, there was little benefit in having an actively managed fund if investing in US large cap, so you bought a tracker fund. Smaller companies you buy an actively managed fund.
But the portfolio management sits above that - it covers the right asset allocation, then the choice of funds to use and the ongoing monitoring of them, and then regular rebalancing to maintain the risk profile.
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Yes I know what they are. You didn't answer my question.
I don't think we'll agree on this, it's not in your interests 😉
- Genesis Croix de Fer
- Dolan Tuono0 -
No they are not proactively managed. There are tracker funds, therefore by definition have no active management, they purely replicate the index they track.
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Ok follow up question, when you say someone needs a portfolio that is proactively managed, do you always mean managed by a 3rd party and not by themselves?
- Genesis Croix de Fer
- Dolan Tuono0 -
Unless you have a good understanding of portfolio construction, understand how to research funds properly, understand the risk associated with each fund and the impact on the risk of the portfolio, and can apply a highly discipled approach to rebalancing, then yes.
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I'll stand by my original statement 🙂
- Genesis Croix de Fer
- Dolan Tuono0 -
In what way does having a tracker fund mean you don't need a portfolio that is pro-actively managed?
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Nothing on it's own I was just checking your definitions.
- Genesis Croix de Fer
- Dolan Tuono0 -
I clearly distinguish between the portfolio being actively managed and the funds making up the portfolio, which will be a combination of trackers and active funds.
The definition of a tracker fund is not mine, it is what it is. No tracker or index fund can ever be actively managed, by definition.
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So you haven't answered my question about why you think you don't need a pro-actively managed portfolio.
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Here's the original post from W&G as a reminder:
"Do you really not see that if someone loses a chunk of their tax-free allowance that their "spending power" in retirement is reduced, all other things equal?
If so, please send me a PM and I'll make arrangements for you to send me £10k or so from your pension pot, as you won't miss it. £10k to me is the same as having to pay £10k extra in tax in terms of the impact on your retirement spending power. Obviously, I'll happily accept larger amounts."
So someone losing a chunk of the tax free allowance either matters or it doesn't. What's your view?
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]0 -
Can you find someone who isn't a financial advisor suggesting everyone in the country needs a pro-actively managed portfolio?
- Genesis Croix de Fer
- Dolan Tuono0 -
Why aren't you answering my question? I answered yours, more than once.
Given that the vast, vast majority of the population are financially illiterate, and many financial adviser also don't consider themselves capable of managing portfolios, why would you know better than people actively involved in the field?
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The sums involved for most of the population are such that I think it's a pretty ludicrous assertion.
- Genesis Croix de Fer
- Dolan Tuono0 -
I don't agree with the premise, no.
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Which shows you are out of touch with what goes on.
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Compelling stuff
- Genesis Croix de Fer
- Dolan Tuono0 -
Thanks, I'll send you my bank details shortly.
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]0 -
It would make up for the hoped-for Truss tax cut you were looking forward to.
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Things have moved on a bit since then. However with my kid finishing uni next summer that's worth more than any tax cut. Happy days.
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]0 -
Hang on, surely it was only six months ago they started?! I'm sure it's not just my perception of time passing as I get older speeding up... 😱
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When I have an extra £10k at the time of my death, I don't think you'll be top of the list.
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Very much so Brian and I can't believe she went to uni in 2020. Now in year 5 and will hopefully be working as a vet within the year.
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]0 -
I'll survive, ta. Although I won't be so daft as to support policies that are likely to make me significantly worse off.
"I spent most of my money on birds, booze and fast cars: the rest of it I just squandered." [George Best]0 -
Don't think there's a meaningful tax increase that won't do that, and you've said that tax increases are coming.
More interesting to think about the underlying logic and effects of the policies.
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