Question for Jun

[jimnbkk]

When I first started in the stock market, I tried to use the W.C. Fields philosophy of investing: Buy a stock, wait until it goes up, then sell it. If it doesn't go up, don't buy it. Now days, I have my half-vast fortune being managed by Fidelity Investments. They manage my 401K and my Brokerage account. They have been doing well. This last week or so, thanks to Pinocchio Putin, it's been not so good. I think, whatever one does with his money is a crap shoot. Even putting it in the mattress is probably a loser, especially if any of it was Ruples.

[whitedesire]

Lol GB I did laugh, could do with cheering up.

Interesting with your ratios Jun, if the markets do go down further it might be worth investing more in equities.

[whitedesire]

Jim bkk, I'm with Fidelity also, and everything is detailed on their website pretty good, what's good also my company pays all the fees and even when I retire the company keeps it in their scheme as opposed to transferring to a SIPP whereby you pay fees to withdraw it.

[Jun]

Interesting with your ratios Jun, if the markets do go down further it might be worth investing more in equities.

Exactly what I intend to do, although I never get the timing quite right.
From memory, the 2000~2003 bear market lasted about 3 years, the 2008 one was about a year and the covid decline lasted just a few weeks. It's too easy to look at the timeline of the last bear market and get it wrong for the next one.

Jim bkk, I'm with Fidelity also, and everything is detailed on their website pretty good, what's good also my company pays all the fees and even when I retire the company keeps it in their scheme as opposed to transferring to a SIPP whereby you pay fees to withdraw it.

This prompted me to look at the charges for my SIPP, again.
Currently I sell off a few stocks from a taxed account each year, so I have not been taking anything from the SIPP (or the ISA).
Drawdown charges seem to be between £30 for a one off payment to £120 per year for drawdown. If I have to pay the latter figure, it's more than I like, however there are can be other advantages to having a SIPP.

The platform fee is £120 a year, plus I pay £10 per trade. So negligible in percentage terms. I hold a mixture of stocks, etfs and investment trusts. The investment trusts typically charge around 0.5~1.2%.
During the accumulation phase, my total costs will be comfortably under 1% per annum.

The real damage with fees is done if you're paying a hefty recurring platform fee plus hefty fees for the funds. One of my friends had a financial advisor set up a pension scheme for him. Having not believed the description, I advised my friend to read the documentation properly and check the platform fee AND the cost of the funds. The total amounted to about 2.3% per annum. EVERY year. He was livid and moved the whole lot into a low cost SIPP.
These recurring charges are the worst. If someone stuck a lump sum into a pension and left it there for 30 years, at 2.3% per annum, about half the pension would be taken in fees.

Back in the days when I was working, I of course joined the employer DC scheme, as for every £1 I put in, they added £2, up to a limit. However, the list of investments was unsatisfactory & I have done better with a free choice of where to put my money.

I suspect your Fidelity pension has reasonable fees and is a very good choice if you're want a hands off pension.
When I wanted to pay more into a pension to avoid 40% tax, it was above their cap for matching contributions, so I set up a SIPP. I've since moved the money from the DC scheme to my SIPP.

[whitedesire]

Not sure what you mean by hands off pension Jun, I assume an annuity. If it is, I don't think Fidelity do annuities anymore, I think they farm it out to independent providers. As you know Jun, annuities do provide security, but they are expensive if you wish to have a single life inflation proofed one, some of them are fetching lower than £3k per year for a £100,000 pot.

I think SIPP charges can be heavy as opposed to a DC scheme which your company would manage, well, certainly where I work, they pay all the charges and pay all the charges when I retire, its kept in a leavers scheme.

I did notice that my ISA (for what that is worth lol) has monthly charges from Fidelity and that could (as you say) erode over the years, however, I suspect the stock market returns on an ISA far outweigh the charges you pay if you choose the right stocks of course. And yes their SIPP fees are reasonable and I think only apply to the withdrawal amount (don't quote me). I think a lot of your charges are coming from trades etc (correct me if I'm wrong) that you wouldn't normally get if you had them in pension funds (pension funds have charges but they seem to be applied already somewhere in their fund (if that makes sense).

With regard to avoid paying 40% tax and instead putting it into your company pension, I tried to do it where I work (which is NI and Tax beneficial), and they only let me put up to a certain amount in because they would not give me a wage less than the minimum wage (nice of them to think of me lol), so I had to put some into a SIPP similar to yourself where as you know the tax man gives a 25% contribution.

With regard to paying tax on private pensions when you retire (I know you didn't ask about this), there are countries that promote tax free benefits when living there (not all though), such as you are not taxed on private pensions on the UK, they have double taxation agreements in place, Malaysia is one of them. I don't think Thailand is one of them. You have to become non resident of course. QROPs is waste of time in my opinion, wouldn't trust it and there are special rules now.

[Jun]

By "hands off" pension, I mean where people either choose the default funds or just select a few funds when setting up the pension and mostly ignore it thereafter. Sorry for unclear terminology.

I'm slightly more hands on, but have still spent only about £75 a year on individual trades in the SIPP, which is negligible when this has outperformed the offerings of the ex-employers scheme. Even with stocks, I tend to buy for the long term, so trading costs are modest.
The ex-employer's schemes tended to have a particularly dire selection of funds. When they had Standard Life running it, it didn't even include the one Standard Life fund I'd choose to own (& have owned for over 10 years), which was Standard Life Smaller Companies Trust, now renamed (AUSC) .

As for SIPP contributions, I used to only contribute what would normally be taxed at 40%. The SIPP provider recovered 25% of the payment, as you say. Also, the remainder of the tax would be dealt with in my annual tax return, so I got the full 40%. Effectively, the HMRC calculation added the SIPP contribution to the personal allowance. I believe the tax code was adjusted for this. You should be getting the same, if it's above the 40% threshold and the rules are the same as a few years back.
My policy was to send money below the 40% tax bracket to my ISA, due to far greater flexibility, including the option of easily emigrating with the money.
I share your thoughts on QROPS & Annuities. With annuities, even with terrible rates, the inflation indexation also tends to be capped at 3%. Although, as someone pointed out on another board, there might be a case for buying an annuity just before one becomes incapable of managing investments.

Thank you for the advice on paying tax on private pensions. That's something I'd like to learn more about, so please feel free to add anything else on the topic.
The 25% tax free lump sum is obviously one opportunity. If living in the UK, maybe use it to live off and fund ISA contributions for a few years. If living in Thailand, perhaps invest it in Singapore.
I've only become old enough to access the pension this year, but should probably continue running down a taxed investment account first.

[whitedesire]

Hi Jun

Hands off get it now , I think that is mine, the company select or you have a choice from about 50 or 60 funds, their choice is mainly geared to lifestyle type situations.

Separately I think pension funds went down after Xmas but before the Ukrainian situation and I'm not sure when the war (famous last words) is over if funds will return going north, bonds are certainly plummeting.

I have a bit of a final salary one, its only worth about £3000 a year but, with a current pot of about 70k, be interesting to see how that pans out, over the next couple of years.