Retirement investment choices

[pp2023]

I joined Interactive Investor in January as an investor novice. I’ve found it excellent, simple to use and you actually get real people messaging you if you need help! Both ii and AJ Bell have selected their own favourite funds (super60 in ii). Both of these fund lists are on their public websites so this makes it easier to narrow down the vast choices in the market.

II also have some model portfolios which are also on their public website.

In the end I mix and matched from the super60 list and the AJ Bell Favourite Funds list. While I find these lists invaluable in making investment choice manageable, I also approach them with some scepticism, for example….

II’s Japanese equity tracker is the HSBC Japan Index Fund (tracks FTSE Japan Index) with a cost of 0.14%
AJ Bells Japanese equity tracker is iShares Japan Equity Index Fund (tracks FTSE Japan Index) with a cost of 0.08%

Hence I don’t slavishly use the Super60 list.
I really like this format of the Super60…..

Even so, my one regret is not finding these platforms earlier in life! (I am 60).

Thank you for your answer. I regret for not being proactive enough and moving away from Aviva too. Anyway, it is never too late, right? I have read about II switching to a new software for their platform and users being unhappy that the software is not reliable and UI is worse. What do you think about that?

[AndrewInDevon]

I find the UI very intuitive to use and haven’t experienced any major issues. They do seem to take the site down for maintenance a little more often than I’ve experienced, but they give you lots of notice. To be honest, it’s easy to become addicted to the site and looking at your portfolio so I actually welcome the enforced break!

I’ve seen some of the comments from some moaners, but I don’t get it myself. I’ve not had any user experience issues. In fact I’d go as far to say that ii is one of the most impressive apps I use.

I use the ii app on my iPhone, which is excellent and the website on my iPad, as the app on the iPad only works in portrait mode which is annoying. You get very slightly different screen views on the website, but it’s not an issue.

I really like the ii articles. The cynic in me expected to see lots of Aberdeen funds being pushed, but to their credit I haven’t experienced this.

[vand]

I will go out on a limb here and say that you are being way too conservative. 3% inflation adjusted is not just very doable - in fact you will find a hard time finding any strategies that can't meet it. Hell, even annuities are paying more that that these days.

Shift over to a low cost SIPP, and given your current age and factoring in any state pension due, IMO you should be aiming to withdraw an inflation-adjusting 5%, minimum.

You're worked hard to get to where you are, if you put in just a little bit more effort to understand how to best utilize your pot for drawdown you can enjoy much more of it instead of paying someone else horrendous and wholly un-earned fees to be a custodian.

[pp2023]

I will go out on a limb here and say that you are being way too conservative. 3% inflation adjusted is not just very doable - in fact you will find a hard time finding any strategies that can't meet it. Hell, even annuities are paying more that that these days.

Shift over to a low cost SIPP, and given your current age and factoring in any state pension due, IMO you should be aiming to withdraw an inflation-adjusting 5%, minimum.

You're worked hard to get to where you are, if you put in just a little bit more effort to understand how to best utilize your pot for drawdown you can enjoy much more of it instead of paying someone else horrendous and wholly un-earned fees to be a custodian.

You are probably right. I am very conservative. Someone here suggested the book "Beyond the 4% rule" and I found it and I am reading it now. It is a good read for answering the question "what withdrawal rate". The author calculates how a 50/50 portfolio with a 1% fee would have behaved over the years since 1900 with different withdrawal scenarios. Educational for me.

[AndrewInDevon]

Looks like ii are about to increase their monthly fee from 9.99 to 11.99, but reduce trading fees.

[EthicsGradient]

Looks like ii are about to increase their monthly fee from 9.99 to 11.99, but reduce trading fees.

What's the source for that?

[AndrewInDevon]

Todays Weekend FT. Says they are increasing the £30k limit to £50k for the low cost £4.99 option, increasing the core fee to £11.99 and reducing dealing charges.

[pp2023]

Looks like ii are about to increase their monthly fee from 9.99 to 11.99, but reduce trading fees.

I saw the article in FT but the article does not mention SIPP fees changes. I am thinking to open a SIPP. Reducing trading fees would be good.

[ayshfm1]

I'm in drawdown and my SIPP is with the halifax. I just about recommend it.

The issues

Website is cumbersome. it does have an app provided you have a hfx credit card/current account, but it does not provide all the capabilities of the website

Admin is cumbersome and the process of setting up drawdown was not slick and errors were made. In fairness part of the cumbersome is the hand off to AJ Bell who HFX subcontract the specialist pension work off too and all the errors were AJ Bell's. On calling, you got through what seems like an endless security check before hfx ask you what you want, then they call AJ Bell and put you on hold for usually a long time.

Still HFX clearly haven't drunk their own champagne lately.

But it is pretty cheap, is a monster of a bank (being Lloyds) and you can any pretty much anything. So the shortcoming are tolerable.

I currently draw 12K just to use my tax allowance and the surplus I am buying VHYL with. But that's because my SIPP Is a mostly FTSE100 sort of HYP and I wanted to generate income and add some diversity with money I currently don't need, YMMV.

[vand]

Thanks.

I think the most remarkable was "put all your eggs in one basket, then watch the basket”.

That’s certainly contrary to today’s orthodoxy. I wonder what you watch the basket for and what thresholds are danger signs.

From the blurb: ‘From "The Zulu Principle" you can learn exactly when to buy shares and, even more important, when to see - in essence, how to make "extraordinary profits from ordinary shares”.’
A large majority of active fund managers fail to make the easily obtainable returns of a relevant index, over periods of about ten years. Those fellows need to read The Zulu Principle.

depends on the basket, really, doesn't it? Nothing wrong with putting everything into a global tracker, but I would question the wisdom of putting everything into a biotech startup that's 10 years from turning a profit.

[Dod101]

Todays Weekend FT. Says they are increasing the £30k limit to £50k for the low cost £4.99 option, increasing the core fee to £11.99 and reducing dealing charges.

Details are supposed to be emailed to those affected this week.

Dod

[AndrewInDevon]

Got my email today. No change to SIPP charges or to the low cost entry (£4.99 for <£50k pots) or super investor (£19.99) monthly fees.
At some point they will move everyone on to the super investor rate as narrowing the gap makes it less obvious why they need 3 levels. I’ll give it 3 years!

Still I am not complaining as my platform fee still works out at less than .05% for me and as I am aiming to invest and hold, with only occasional trades, it’s still good value.

[pp2023]

I would like to ask a specific question about holding accumulation vs income funds when in flexi-access drawdown. What are advantages/disadvantages for having one or the other type. I am not quite clear. If I choose accumulation is there a trade cost for reinvesting dividends? If I choose income is there a tax implication/complexity? Is there advantage to get the dividends in an income fund as an part of the drawdown (so no trading done?), say 1-2% and then sell some funds to withdraw a remaining up to 4% income. Which one is simpler to handle in later years?

[Urbandreamer]

I would like to ask a specific question about holding accumulation vs income funds when in flexi-access drawdown. What are advantages/disadvantages for having one or the other type. I am not quite clear. If I choose accumulation is there a trade cost for reinvesting dividends? If I choose income is there a tax implication/complexity? Is there advantage to get the dividends in an income fund as an part of the drawdown (so no trading done?), say 1-2% and then sell some funds to withdraw a remaining up to 4% income. Which one is simpler to handle in later years?

I'm not surprised that you are unclear. At the end of the day, when talking funds inside a pension scheme, arguably there is no difference.

Now if held outside a pension scheme than there is a significant tax difference as any income would be taxed as income and surplus lead to purchase costs for new units out of taxed funds. Accumulation units avoid that, but selling them to realize their accumulated income might lead to CGT. Non of which is true in your case. You will only pay income tax upon money that you take from the pension.

Many here though don't hold funds but IT's and shares. We have to chose if we wish to invest in growing companies, who often don't provide much in the way of dividends. Hence income would have to be realized by selling, which feels uncomfortable and takes effort. This leads some to chose companies paying good dividends over ones growing. There are even some IT's, like IBT who gain little or no income from their investments but pay out quarterly using money garnered by selling investments. This is because Biotech businesses don't earn money, but if successful are sold to big pharma.

On a practical basis, arguably there is less work if you hold accumulation funds until retirement, then shift to distribution funds, only selling if the distributed income doesn't match your spending. Or hold a mix based upon your desired income.

[Alaric]

Now if held outside a pension scheme than there is a significant tax difference as any income would be taxed as income and surplus lead to purchase costs for new units out of taxed funds. Accumulation units avoid that, but selling them to realize their accumulated income might lead to CGT. .

There's no significant tax difference, The income added to the accumulation price forms part of your taxable dividend income, For CGT calculations, you are able to add the distributions to the base cost, reducing the gain when you eventually sell.