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jago

Escaping The Pension Trap

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I was offered a pension at work a couple of years ago.

Even though I am one of the tinfoil hat brigade who can envisiage government pilfering of pension pots (like in Australia via double taxation)...

I said yes and started making the mimimum payments.

What interested me was screwing my employer out of a little bit more cash. Er, I mean, making most of the kindly provided benefit.

However, in flicking through the myiad of investment funds available (Aviva) I noticed that every single fund is strongly linked to the economy where I earn my wages; the UK.

The Asian Pacific fund was a case in point. The investment made by this fund is not so much asian companies but western companies operating in Asia and at worst, Australia and New Zealand.

This is no hedge.

I searched as best as I could and nothing antagonistic to my income could be found.

After 2 years the fund has appreciated at 0.35% - a loss after the high inflation we've had.

My question is...

is there a way to plan for one's retirement in a more hands on way? Can I trade my own fund? Can I choose my own stocks and commodities without being taxed? Can I find a way to invest in African economies for example?

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My question is...

is there a way to plan for one's retirement in a more hands on way? Can I trade my own fund? Can I choose my own stocks and commodities without being taxed? Can I find a way to invest in African economies for example?

Use a SIPP, e.g. Hargreaves Lansdown and choose your own stocks. Not all investments can go into a pension but there will be more choice than a typical company provided scheme.

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Silver coins from Germany @ 7% VAT or Gold - should appreciate at proximately the same rate as the currency is being devalued.

A bit more risky would be a stocks and shares ISA then follow periodic recommendations from the like of Money Week.

The only problem with managing your own pension, is that when it works out poorly you only have yourself to rather than the government.

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It depends on the size of the fund you have and/or how much you hope to save in the future.

If you want to be able to make your own investment choices then Hargreaves Lansdown looks like a good choice as you can purchase Shares, Bonds and Investments trusts at reasonable rates. Services like Fidelity are more focussed on just unit trusts and if you try and do anything else the costs go way up.

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Glad you realised the pitfalls of pension schemes. Do let us know what the assumed growth rates were in the paperwork? Probably something ridiculous like 6% pa.

I am skeptical of SIPPs due to locking away for decades but many people use them to good effect on top of the ISA. A SIPP wrapper is also liable for future pilfering but is probably the best majority component of your pension planning, especially if you are a higher rate tax payer. Investment funds , trusts etc all have fairly noxious stealthy charges, which when compounded over time cause real damage to your pension - so you should pick your own stocks but as mentioned will only have yourself to blame. A decent compromise would be a mixture of individual stocks and ETF trackers. Another problem is that stocks are generally overvalued at the moment although I am still finding some good value.

Dare I say it, in time a property (or share in a property fund) might be a good diversification too.

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Silver coins: That would be great! But how do I get my company contributions to pay for such a thing? And how do we prevent me from selling them on before retirement?

SIPP: So I can transfer what I have already paid in to a SIPP and then continue to have both employers contributions and my own contribute further to this

Silver coins from Germany @ 7% VAT or Gold - should appreciate at proximately the same rate as the currency is being devalued.

A bit more risky would be a stocks and shares ISA then follow periodic recommendations from the like of Money Week.

The only problem with managing your own pension, is that when it works out poorly you only have yourself to rather than the government.

"If the fund value exceeds the 'Lifetime Allowance' of £1.25 million at retirement, then the amount above £1.8 million will be taxed at 55%"

^ hmm... another risk... that the lifetime allowance of £1.25mil becomes worth what £5,000 is worth now via inflation and is barely enough to survive on...

^ next risk, the SIPP ("broker"?) is the trustee, so counterparty risk on them going bankrupt to think about:

http://boards.fool.co.uk/with-the-sippdeal-e-sipp-the-trustee-of-the-scheme-12062431.aspx

...will need to search more to get self trustee...

Too much risk to put in more than the minimum for me but it's better than the company pension. The fees for funds don't look too bad at first... until you notice there are more than 1 type of fee; custodian etc.

Interesting stuff

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SIPP: So I can transfer what I have already paid in to a SIPP and then continue to have both employers contributions and my own contribute further to this

Your company might decline to play.

I have a minimum amount going into a company pension (to secure the employer contribution), and a greater amount going separately into a SIPP.

"If the fund value exceeds the 'Lifetime Allowance' of £1.25 million at retirement, then the amount above £1.8 million will be taxed at 55%"

^ hmm... another risk... that the lifetime allowance of £1.25mil becomes worth what £5,000 is worth now via inflation and is barely enough to survive on...

Lifetime limit is a risk, but not for normal-sized pension pots. When they change the rules to make things worse, money already in a scheme under the old rules always gets protected.

^ next risk, the SIPP ("broker"?) is the trustee, so counterparty risk on them going bankrupt to think about:

http://boards.fool.co.uk/with-the-sippdeal-e-sipp-the-trustee-of-the-scheme-12062431.aspx

...will need to search more to get self trustee...

My SIPP is as safe as ...

All client money is held on deposit in Trust accounts, so that any creditors of Hargreaves Lansdown would have no legal right to it, we cannot use any of this money to cover Hargreaves Lansdown's obligations, and is subject to controls and procedures over and above those required by the FCA. In addition client money within the Vantage Service will be spread across a number of banks, excluding the HL Vantage Cash ISA which is held specifically with Lloyds Bank.

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You could buy gilts with some of it. This will reduce the volatility of the overall holding whilst helping it to maintain it's value. It is what many of the larger pension funds do.

One problem with pension funds is that they take their fee, usually 1%, regardless of how they perform. This is quite a substantial fee over time, and you should ask yourself what it is that they do that earn so much. (ie. whether they have the record of outperforming the stock index in order to warrant it...)

African stocks usually come under emerging markets but not always. Google "africa etf" for research. ETF's charge fees also. It might be a good option to find UK companies that have exposure to and are engaged in African markets and buy shares directly.

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You could buy gilts with some of it. This will reduce the volatility of the overall holding whilst helping it to maintain it's value. It is what many of the larger pension funds do.

Well, if you want to lock into the worst returns in history.

One problem with pension funds is that they take their fee, usually 1%,

What century are you living in? If your fund managers are taking 1%, they'd better be doing something to earn it! I wouldn't even consider a pension charging that sort of fee.

African stocks usually come under emerging markets but not always.

Not so much emerging as frontier. More a place to donate than to invest, unless you have specialist expertise. My Africa assets are less than 1% of my total, and entirely in managed funds.

It might be a good option to find UK companies that have exposure to and are engaged in African markets and buy shares directly.

That'll be resource companies, and if you exclude the blue chips (like Shell) you have the ultra-high-risk end of investing. Gambler stocks.

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  • 242 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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