Run my own pension?

megamuel

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I'm 24 and I dont pay in to a pension as yet. I was thinking about running my pension myself rather than have some monkey doing it, or should I say a different monkey! Anyway, I was just wondering if anyone on here manages their own pension and if they, or anyone else has any advice to offer me. I was thinking about putting £300 per month in to some sort of investment/savings such as shares - building up a diverse portfolio over time. Gold, Silver, Platinum and Paladium Bullion. These interest me because they will always hold some value, maybe even more so when bank and government debt spirals out of control! Plus if I buy the bullion it will help me to keep it long term rather than buy and sell at the click of a button. Any other ideas or suggestions? Would be great to hear from other people that have managed their own pensions... Cheers,

Sam.
 
You're theory is good. The problem you will have is the self invested pension providers look for a minimum initial investment - usually around 10k. The charges are heavy too and you are limited to where you can invest.

Look at self-select ISA's - still tax efficient but also can still get at the cash if you need it.

Get some professional advice is the real answer.
 
Have a look at the Hargreaves Lansdown Vantage SIPP. I moved my one of my pensions to them because there is more choice (~2000 instruments), no annual fee and the 'trading' charges are lower. Min contribution is £50 per month.
I've managed this pension myself for 20 years and it's done well, but not by buying and holding, but by long term position trading in and out. There are times when all assett classes lose value at the same time, so you need to get into cash and wait for the next opportunity - or watch your capital shrink.
Professional advice - no thanks. Anything driven by commission is not in your interests imho.
Glenn
 
Glenn's advice is very good and especially the bit about professional advice. Unless you specifically pay an upfront fee to the advisor and they are not tied to any product and receives no commission on sales of any product, you are not receiving advice what you are receiving is a sales pitch.

Investment should encompass all your short, medium and long term needs (all a pension is a long term investment plan). I personally prioritise these from highest to lowest in the order I previously gave so

Short term - High
Medium term - Medium
Long Term - Low

I see too many people talking of pension plans in the past and most don't have a short to medium term plan. A lot of these are now struggling and out of work. They have their priorities wrong and concentrate too much on tax breaks and not enough on leverage and cash-flow.

The following is not advice but a snapshot on how I manage my investment plan.

I leverage up my investments from short -> medium -> long

For example I now use short term trading and business ventures to buy my medium to long term investment vehicles such as real estate. I may even use it to leverage risky ventures but its an area I am still on a steep learning curve. I do not concern myself with tax breaks for pensions as there are already enough tax breaks in what I do already, I get to leverage my money and I receive a cash-flow NOW and when I finally retire.

Investment is a business and should be treated as one. Look at it as if you are starting a business and that always starts with a plan.

Priority one right now is gain a financial education.
 
gold in a safe is the best way to accumulate - by the time you will retire the governments will be completely broke, inflation at 30%, the financial institutions a big mess, gold at 10000$, oil at 1000$. Don't put any significant money in anything made of paper. Also, agricultural land is a good investment.
 
Isn't the main problem with all this the fact that the law requires you to buy an annuity? I'm a bit hazy on it all (for no good reason really), but that was my impression.....
 
Isn't the main problem with all this the fact that the law requires you to buy an annuity? I'm a bit hazy on it all (for no good reason really), but that was my impression.....

The way it used to be (a few years ago) was that you could take 25% of a SIPP as a tax free lump sum after age of 55. With the remainder, you could buy an annuity or take income no greater than would be provided by an annuity. Normal income tax rules apply to the income. At the age of 75 it had to be turned into an annuity.

Things may have changed.

SIPP => tax free in taxed out and hard to get at

ISA => taxed in and tax free out, easy to get at, but you can't put it back.
 
Isn't the main problem with all this the fact that the law requires you to buy an annuity? I'm a bit hazy on it all (for no good reason really), but that was my impression.....

Annuities are a problem and an opportunity.
You have to buy one by age 75 unless you opt to pass pension pot on to your dependents, which is then subject to tax. (There are various angles on this too complex to discuss here).
What you get as a pension depends on the annuity rates at the time you take it - a question of timing - and which annuity provider you use. Shop around.
The opportunity is that for every pound saved in a pension, the taxman gives a basic rate taxpayer a 22p and a higher rate taxpayer a 40p contribution.
So if you contribute £300 a month between age 30 to 65, your pot will be boosted by an additional £71,000 for a basic rate tax payer and double that for a higher rate tax payer. The taxman is giving you money.
So if you don't save in this way you are chucking free money down the drain.

If you invest in, say, property, then all your eggs are in one basket and you can see what has happened to that recently - and it probably ain't over yet. With a pension you have wide choice, one of which is cash, and if you want to be ready for inflation then there are a number of assets which increase in value when it happens.

What doesn't get talked about much regarding pensions is that whilst they are a good thing in principle, they are effectively the same as your trading capital i.e. if you 'trade' badly, then your capital shrinks. It's no good just pumping money in and not paying attention to what you invest it in.

Glenn
 
Annuities are a problem and an opportunity.
You have to buy one by age 75 unless you opt to pass pension pot on to your dependents, which is then subject to tax. (There are various angles on this too complex to discuss here).
What you get as a pension depends on the annuity rates at the time you take it - a question of timing - and which annuity provider you use. Shop around.
The opportunity is that for every pound saved in a pension, the taxman gives a basic rate taxpayer a 22p and a higher rate taxpayer a 40p contribution.
So if you contribute £300 a month between age 30 to 65, your pot will be boosted by an additional £71,000 for a basic rate tax payer and double that for a higher rate tax payer. The taxman is giving you money.
So if you don't save in this way you are chucking free money down the drain.

If you invest in, say, property, then all your eggs are in one basket and you can see what has happened to that recently - and it probably ain't over yet. With a pension you have wide choice, one of which is cash, and if you want to be ready for inflation then there are a number of assets which increase in value when it happens.

What doesn't get talked about much regarding pensions is that whilst they are a good thing in principle, they are effectively the same as your trading capital i.e. if you 'trade' badly, then your capital shrinks. It's no good just pumping money in and not paying attention to what you invest it in.

Glenn

I find all investment vehicles have a cycle but the reason I prefer real estate is I can leverage my investment with banks money which as far as I know cant be done with any other kind of investment other than running your own business, and I receive monthly income from my portfolio.

But like with any investment as you point out there are cycles and in my opinion wrong and right times to buy. But more important than that there are wrong and right reasons to buy. I was talking to a fellow real estate investor about 2 years ago and he was in my opinion making massive mistakes buying real estate for the capital appreciation only. The rents he collected didn't cover the mortgage payments. He would not accept that the first thing he should consider was cash flow. Needless to say his 75 property portfolio has dwindled to about 5 with banks snatching them back.

I am personally buying land from developers who need the cash at the moment. So if any of you want to help a fellow trader and know of some land available from a "distressed" developer preferably with planning PM me (I know I shouldn't look at just capital appreciation but hey we all have to speculate a little and I have set aside designated funds for this). I guess you have to be cheeky.
 
Thanks for the replies. Sorry for the slow response - I've been away. What advantages/disadvantages would investing in a SIPP give me over say making investments through a regular broker? I mean if I make regular investments in shares in a SIPP, how would that differ to making regular investments in my Halifax Sharebuilder account?

Glenn I like the sound of long term position trading instead of buy and hold investments. What sort of system do you use for this (if you don't mind me asking?)? I know moving averages are pretty useless on the shorter timeframes but could then be used for long term investments? Do fundamentals have more of an impact on position trading?

Also, does anyone have any long term views on precious metals as bullion? I've bought a few blocks of Palladium and Silver and hoping to get some gold too. More of a collection/hobby than an attempt to make money although I do plan to hold long term and maybe one day sell for a profit. Thanks,

Sam.
 
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Sam
Some thoughts embedded in your text.

Thanks for the replies. Sorry for the slow response - I've been away. What advantages/disadvantages would investing in a SIPP give me over say making investments through a regular broker? I mean if I make regular investments in shares in a SIPP, how would that differ to making regular investments in my Halifax Sharebuilder account?

Read my previous post about the tax advantage of using a SIPP.

Glenn I like the sound of long term position trading instead of buy and hold investments. What sort of system do you use for this (if you don't mind me asking?)? I know moving averages are pretty useless on the shorter timeframes but could then be used for long term investments? Do fundamentals have more of an impact on position trading?

Fundamentals do have an impact, but sentiment has a greater impact imo.
Examples from the last two big market tumbles:-
- Just prior to the Dot Com bubble bursting, even the people with little money were getting into tech shares. There's an old saying "When your taxi driver starts giving you share tips, you know it's time to get out".
- Just prior to the Credit Crunch crazy mortgages were being loaned to people with no money to pay them back; people were using credit cards like there was no tomorrow, and of course things like CDO's were being used by banks, although that was not so publically known.
Any talk of a "New Paradigm" or "It'll be different this time" are warning signs that things have got out of control.
Those are examples of what you might call contrarian thinking - when the herd is galloping towards the cliff edge it's time to step aside and look for opportunities to go in the opposite direction.

As for MA's, I don't know. I only use them to smooth other things. My view is that they are only looking backwards and tell you nothing about the future, except that the 200 day ma seems to be commonly used as a yardstick, and although it is meaningless (imo) in itself, if enough people use it, that will have an impact.
I use a technique which I can't disclose because it's under an non-disclosure agreement with a friend of mine. What I would say is that if you have a technique which performs well enough in lower timeframes, it will do the same in higher ones, but don't just rely on the technicals because markets are not technical all of the time.



Also, does anyone have any long term views on precious metals as bullion? I've bought a few blocks of Palladium and Silver and hoping to get some gold too. More of a collection/hobby than an attempt to make money although I do plan to hold long term and maybe one day sell for a profit. Thanks,

Prescious metals are no different to anything else, with one exception imo. Most (all?) currencies are based on the fiat system (look it up) and if there is likelihood of devaluation/inflation, or worse, then prescious metals are one of the few places to turn to. In a SIPP or trading account you can access Exchange Traded Funds which are backed by prescious metals.

Sam.
 
Cheers for the replies Glenn. I'll definately look into starting a SIPP. Can you exaplin to me in dummies terms though, what an annuity is? I tried reading the wikipedia page but it didnt make sense to me! Cheers,

Sam.
 
Cheers for the replies Glenn. I'll definately look into starting a SIPP. Can you exaplin to me in dummies terms though, what an annuity is? I tried reading the wikipedia page but it didnt make sense to me! Cheers,

Sam.

Unfortunately pension/annuities are complicated because of all the variations of what you can do. However here's a stab at keeping it simple :)

Annuity - Definition

To receive a pension, you transfer your money to an annuity provider. (Choose from Annuity Best-Buy tables at the time you do this. Once you have chosen your provider you are stuck with them)
They invest it and pay your pension.
The amount you get depends on how long they think people of your age will live, what your state of health is (e.g. are you a smoker, do you have diabetes, have you had a stroke ? etc) and what the annuity rates are at the time.
The annuity rates depend on the yield from long term gilts (government debt).

Can't say more than that without writing a book about it !
Hope it helps.
Glenn
 
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