With advice, you’re onto a winner
First published on 26 of January 2015 • Updated 25 of July 2017
So just what is the easiest way to be £50,000 better off when you retire? Matthew Harris, director of Dalbeath Financial Planning, reveals how a simple phone call might win you a life-changing amount of money.
If you happened to win £50,000 on Million Pound Drop, you’d count that a good night’s work. It’s a lot of money. And yet you may not have considered that you could be better off by this much (and in some cases by even more) just by making some simple changes to your investments or pensions with the help of an IFA.
Perhaps you (or your partner or parents) own products such as investment funds, with-profits funds, investment bonds, endowments or a personal pension. Well here’s some news: the annual fees you are paying on them are almost certainly two or three times what they need to be. We’ve found this is nearly always the case. And it amounts to hundreds or even thousands of pounds of your money being taken from you each year unnecessarily. Over the years, this can add up to a life-changing sum.
The losses you just don’t see
One problem is that many pension-savers and investors don’t realise they are being charged at all. This is because the money is taken from their funds without a bill being sent to them. Also, charges are usually expressed in percentages, and is it difficult to work out what those percentages mean in real money.
However, assuming annual investment growth of 7%, a 40 year old with £50,000 in an investment fund or pension will have £241,000 at retirement if they pay annual charges of 0.5%. But if they pay 1.5%, they will end up with only £190,000. See the difference. On those figures, it’s equivalent to losing your initial investment, and more.
The problem is particularly acute for investors and pension-savers who have held products for some time, as most policies sold in the eighties, nineties and noughties were very expensive. You may find that a salesman you haven’t seen for decades is still taking money each year from your fund, despite not doing anything for you.
Time to phone a friend
Getting professional help from an experienced independent financial adviser (IFA) is the first step. A first meeting with your local IFA should be completely free, and they should take as much time as is necessary to understand your circumstances and priorities.
Make sure that your adviser explains clearly what they are recommending, and does not use jargon. Ensure, too, that they really are independent. Many advisers these days are restricted to recommending only products from a certain group of banks and insurance companies, which limits your choice and could cost you more money. A genuine IFA can and will advise you on the whole market.
So if you or anyone in your family has investment products or a personal pension, think about the size of the difference that quality independent advice could make. You could find that you’re onto a winner.
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Matt Harris, director of Dalbeath Financial Planning, is a qualified independent financial and mortgage adviser. Matt advises clients on all areas of their finances, including mortgages and life insurance, but particularly specialises in pension and wealth management.