How to get the cash out of your Pension

Tangata · Post by **Tangata** » 10 Dec 2010, 19:22

Thanks for the feedback folks.

The pension pot has about £62k in it, which means the SIPPS fees of £630 per year are about 1%, which doesn’t seem too bad, but if I only put 30% of it into gold, then the fees are 3% a year…. And then what to do with the other £40k? Leave it in the ‘conservative’ option available under the new pension company, which would be a mix of blue chip equities, gilts and bonds.

Pointon York also do the “Individual SIPP’ which allows multiple investment vehicles, eg bullionvault and commercial property and land. The fees for this are ‘substantially’ higher (not sure how much higher as they’ve not yet sent me the fees schedule) which puts me off a bit.

At the end of the day like LB3 I too am more interested in safety than making a profit, retirement is 20 years away – although you’re right Ken, at some point I may just rent out my house and bugger off on my boat and find somewhere cheap to moor up (giving Somalia a wide berth!)

PaulS – you mention self-administering a SSAP, do you know if the same option applies to a SIPP?

Lord Beria3 · Post by **Lord Beria3** » 10 Dec 2010, 20:18

The conservative option sounds like a OK plan. I have some money in equities (oil and food fund), both of which are doing very well at the moment. I am focused on making a profit on these funds, and if I reach my target profit (50% and 100% respectively) I intend to put the intial deposit into a super safe fixed bond with a interest rate which keeps up with inflation and the 'free' profits from the equities into further equities - blue-chip companies geared towards emerging markets and commercial real estate.

Both of which offer income long-term which is critical to see my pot of money build up over the coming decades. The Green Tendancy will say that is pointless, but they are wrong. Good quality property in prime London will always be a valuable thing to invest in and well run companies with a global exposure should do fine for the next 2 decades as the emerging mkt grows - even if the West gets buggered in the process.

JohnB · Post by **JohnB** » 10 Dec 2010, 20:58

Lord Beria3 wrote:Good quality property in prime London will always be a valuable thing to invest in

Always? I hope it's waterproof

.

bealers · Post by **bealers** » 10 Dec 2010, 21:39

@PaulS Thanks for the recentish post re: charges.

I've spent a decent chunk of time investigating a SaSS/SiPP in order that my wife and I can free up the cash we have in a few pots to buy us some wood or agri (or both) land. However the charges (similar to those that you quote) seemed very high and I've been dragging my heels whilst waiting for a decent plot to come along.

I get the impression that you're using the land? My understanding was that if one is 'connected' to the asset then a surveyor would need to come up with a fair market rent which we would then pay to ourselves in effect. Have you had any dealings with HMRC over this? I assume you can charge any upkeep costs, fencing etc, back to the pension too?

Have you had any thoughts about what happens at retirement? I seem to recall the law being or about to be changed so that one is not compelled to buy an annuity but I wonder if that this still could leave open the compulsion to at least liquidate it. Do you have a view on this? (TSHTF scenarios notwithstanding)

PaulS · Post by **PaulS** » 12 Dec 2010, 11:09

bealers wrote:@PaulS Thanks for the recentish post re: charges.

I've spent a decent chunk of time investigating a SaSS/SiPP in order that my wife and I can free up the cash we have in a few pots to buy us some wood or agri (or both) land. However the charges (similar to those that you quote) seemed very high and I've been dragging my heels whilst waiting for a decent plot to come along.

I get the impression that you're using the land? My understanding was that if one is 'connected' to the asset then a surveyor would need to come up with a fair market rent which we would then pay to ourselves in effect. Have you had any dealings with HMRC over this? I assume you can charge any upkeep costs, fencing etc, back to the pension too?

Have you had any thoughts about what happens at retirement? I seem to recall the law being or about to be changed so that one is not compelled to buy an annuity but I wonder if that this still could leave open the compulsion to at least liquidate it. Do you have a view on this? (TSHTF scenarios notwithstanding)

Yes, we farm the land, which is conveniently located right next to our little farm - actually it is simply part of it.
In the past 5 years we made one payment in respect of 'grass fees' (at £50/acre). To date nobody has shown the slightest interest in this, nobody chased us, the pension fund has zero income. But actually the land in question has increased in value by about 50%.

Retirement: we do not plan to retire in the conventional sense. Instead we plan that one or both of our sons will at some point move onto the farm and take over the bulk of the work - after all that's why we've done it.

If and when we make some sensible money from producing food from the farm, we may resume our 'grass fee' payments to the fund and build up a cash sum. Similarly, we are in the process of adding our sons to the scheme and directing their pension payments to it, including their employers contributions. Eventually we should be able to buy some more land or use it in some other ways to benefit the fund.

There is an additional advantage to adding the next generation to the fund: when we kick the bucket, the pension fund will continue to exists for the benefit of its remaining beneficiaries - namely our sons. Without them it would be taken over by The Crown!

One last point, new legislation announced just last week means that you are no longer forced to buy an annuity by the age of 70, as was the case up to now. It is perfectly OK to never buy an annuity, meaning the pension fund/ land remains untouched.
You can always use the pension contributions of the younger members and the income from the land to pay a pension of sorts to the older members.

PaulS · Post by **PaulS** » 12 Dec 2010, 18:20

Tangata wrote:PaulS – you mention self-administering a SSAP, do you know if the same option applies to a SIPP?

We have a SSAP, so no I don't know about Sipps charges.
But SSAP is better:
- can be transferred across the generations
- can be used to get cash out: younger generation pays in, older gets pension
- can be self-administered, so zero fees after the first year
but has to be set up by a company for the benefit of its directors and 'senior' employees
- although it costs just £2 to set up a new company

PaulS · Post by **PaulS** » 12 Dec 2010, 18:35

Btw, the 'conservative' option mentioned earlier will not help you much.
You will simply lose slightly less than the standard option.

Consider this

Currently FTSE companies are priced at anything between 8 and 32 p/e ratio (i.e. shares cost 8-32x the dividend paid). Thats fine in a Growth economy.

In a reducing economy, where on average all companies grow SMALLER, dividends grow smaller and FTSE goes down over time, it does not make sense to pay 8-32 times the likely dividend.

It may make sense to pay 2-3 times the likely dividend.
That would translate to FTSE ending up at somewhere between 1000 and 2000 point, which is 3-6 times lower than now.

So expect the Standard option to reduce your investment by about 70-80% and the Save option by about 50-70%.

Much better to invest in something that is likely to be required in energy poor future:
- energy (PV, wind turbine, hydro, wood, etc)
- food (agri land, food growing business, perhaps food preservation, substitutes for imports, etc)
- local services (repairs, making things, work shop, etc)
- skills (train yourself, get manuals, handbooks, etc)
- community (find other like minded people, set up a co-op, eco-hamlets (guess who will like this?), etc)

There will be companies that do well, but they probably don't even exist as yet. Even the obvious investments, like in oil companies and renewables manufacturers are doubtful for various reasons.

Lord Beria3 · Post by **Lord Beria3** » 12 Dec 2010, 21:02

Investing in food and oil companies is a good bet going into the next couple of decades. Because it will take decades to get the global economy of oil and so there will be periods of massive profits for the oil companies (and nice dividends) so I would suggest that you invest in those.

Prescious metals, as a alternative currency in a era of high resource prices, inflation and massive debasing of currencies by central banks will keep PM high (along with declining supply for gold and silver) so they should be a must for any portfolio.

Some investments in blue-chip companies (National Grid) are wise. Yes some may struggle in the future but utilities and power companies will still be around. Gilts are dangerious but index-linked gilts should be ok because you will avoid the stealth default.

Possibly fine wine is a possibility as well as land - which is booming in value.

nexus · Post by **nexus** » 12 Dec 2010, 21:16

Possibly fine wine is a possibility

OK, Swiss Tony.

Tangata · Post by **Tangata** » 13 Dec 2010, 18:37

Thanks guys, some very interesting points to further look into

I've found a cheaper sipp provider - Hornbuckle Mitchell, they do a single investment sipp for £250 a year or multiple investment sipp at £490 a year (both +vat) which doesnt sound too bad.

The only drawback is they insist on you coming via an IFA. I've never had much faith in IFAs, but I think things have changed now so some will advise on a fee only basis rather than commission based.

Does anyone know of a good IFA, if possible one who's PO aware?

Tangata · Post by **Tangata** » 13 Dec 2010, 18:40

They've also been lobbying the Dept of Work and Pensions re Overcoming pension rule barriers to investing in renewable energy:

http://www.hornbuckle.co.uk/Portals/Hor ... energy.pdf

DominicJ · Post by **DominicJ** » 14 Dec 2010, 12:00

Lord Beria3 wrote:Good quality property in prime London will always be a valuable thing to invest in

Prime Property in Tokyo is Still massivly down on its peak price, which was 20+ years ago.
Overpaying is overpaying.

PaulS · Post by **PaulS** » 14 Dec 2010, 13:19

Also, some of us predict up to 80% reduction in the price of property as a result of the collapse of world financial systems.

RenewableCandy · Post by **RenewableCandy** » 14 Dec 2010, 17:24

erm well there's yer Exchange-Value and then there's yer Use-Value...

If a property is of use to you, then it has a value regardless of its price.

Lord Beria3 · Post by **Lord Beria3** » 24 Dec 2010, 13:43

Prime commercial/residential real estate in central London should be relatively immune as the worlds global superrich are the main buyers in this area (Kensington, Belgravia, Mayfair, City of London etc).

The superrich like to buy property in these areas as a kind of investment in hard assets - this is likely to increase as bonds/equities get more dodgy.

So I would suggest that while overall property will be a bad investment (in the West at least) you can make a exception for 'super-prime' real estate.