31 billion reasons why your retirement may not turn out as you'd hoped

According to recent research by Bestinvest there are no less than 113 'dog' pension funds (over £2.5 million in size) that are serial underachievers. The total amount invested in them is £31 billion! Their underachievement is likely to have a serious impact on their owners' retirement plans. Whilst I have some sympathy, everyone should have realised by now that financial planning is a process and not an event, so you need to regularly review your pension funds and the amount that you're putting aside each month/year or you could find yourself 'enjoying' a retirement on the breadline.

To give an example, even 3% underperformance each year can make a huge difference. A simple example may help. Let's say you put £20,000 into a pension today anticipating your retirement in 25 years' time and that you have an adventurous attitude towards risk. You might expect to achieve a 9% per annum return on your money which (ignoring charges for the sake of simplicity) would result in a fund of £215,570 when you retire. If you had picked one of the dogs, however, your pension fund would only have grown to £107,297, so you'd receive LESS THAN HALF the pension you might reasonably have hoped for!!

Do you have any dogs in your pension investments? Unless they are professionally reviewed on an annual basis it's highly likely that you do, so get them checked out now.

How to afford that luxury car

I'm regularly emailed with the latest contract hire and contract purchase deals for new cars. One of today's deals is particularly good -

Audi A6 TDI S-line for an £1,842 deposit and £307 per month for the next 23 months, based on 10,000 miles per annum.

These figures include VAT, so if you can claim part/all of it back then they're even better value.

The total payments for the car are £8,903 over the two years. The Audi's list price is £32,300.

So, what are they worth when they're two years old? Well, a 14,000 mile example of the Audi is on the Autotrader website at £17,690, a drop of £14,610. The £17,690 price is to buy it from a dealer so you can bet that he paid no more than £16,000 for the car - the real drop in value is close to 50% of list - over just 2 years!

If I was in the market for a new A6 I'd be going for the finance option - saves a lot of money and you can just hand the thing back no need to listen to any insulting offers for it - that fact alone is priceless! Of course, you could argue that the even cleverer thing to do is buy the used one. My own car was bought from a BMW dealer at 2 years old and at a discount of over 40% on the cost of a new one. It had 4,500 miles on the clock!

It's not just Audi - BMW and Mercedes are at the same game. So if you're in the market for a new luxury German car at present - seriously consider financing it - you could save a fortune!

I'm back - sorry it's been so long since my last post!

Wow - six months since my last post! It's hard to believe, but then there has been a lot going on. We have decided that Carrington Wealth Management will, in future, be (a) directly authorised (we're currently part of the Paradigm network of financial advisers) and (b) a limited liability partnership.

There are two main reasons for the first change - one is that being part of a network places restrictions upon us in terms of the subjects that we can advise clients on (for example, we aren't permitted to advise clients in Spain on QROPS pension plans) and the second is that as we are authorised via the network we could be unable to advise clients in the future if the network got into financial difficulties (as has happened with others in the past). Direct authorisation ensures the continuity of our service and the widest possible range of options for our clients.

The change to an LLP (Carrington Wealth Management is currently an 'ordinary' partnership between myself and my wife Jill with unlimited liability) is for two reasons - the first is our own financial security and the second is that it makes it easier to grow the business.

Our application for direct authorisation is currently undergoing scrutiny by the Financial Conduct Authority and we hope to hear that the new LLP has been approved within the next few weeks, after which time I'll be posting much more regularly. If you have any ideas for subjects that you'd like to see covered in the blog or on our YouTube channel them please let me know.

Kind regards, Steve Laird

A New Year = A New Dawn for financial advice in the UK

Jan 1st, 2013 marked the beginning of a new era for financial advice, particularly in the areas of investments, pensions and general planning. It's called the Retail Distribution Review (RDR). As a result of the RDR it is no longer possible for advisers to receive commission on new investments or pension plans (including top-ups) so you need to be prepared to pay a fee for the advice - either directly or indirectly (some, but by no means all, providers will facilitate fees being paid out of the capital that you invest with them, if you prefer it that way).

Fees will be explicit i.e. you'll know exactly what your adviser is being paid and what you can expect in return, both initially and on an ongoing basis. You may be tempted to pay for the initial advice and save money by not agreeing an ongoing review aervice but this may be an expensive mistake, unless you are expecting your circumstances never to change, nor your attitude towards investment risk, nor global economic conditions, nor the managers who look after your money on a day-to-day basis etc.

That said, most people do not need to see their adviser more than once or twice a year. Your own adviser will be able to explain what review services they are offering and how much they'll cost you. If you are unhappy you can always vote with your feet and pay the fees to another firm instead.

One final point - paying your adviser a fee shouldn't increase your overall costs - they would previously have been paid commission which came out of the charges made on your investment/pension. Those charges should now reduce as the providers are no longer (without your express permission) paying the adviser, although you shopuld be aware that many providers intend to keep that money for themselves - a shameful policy imho and perhaps a good reason to take your savings elsewhere?

Chancellor's Autumn Statement

Pleasantly surprised by the Chancellor's speech today. Given that he has nothing to work with he managed a generally upbeat message and some genuine creativity. Ultimately, our fate is decided not just on these shores but by the state of the global economy and until it picks up in a sustained manner our ability to control our own destiny is limited, albeit much less so than if we'd be in the Eurozone. We may all have to be patient for a long time yet, so I'll be making sure that my investments are well-diversified, primed to give me protection when, inevitably thanks to Quantitative Easing, inflation takes hold and keeping a bit in cash for buying opportunities when the markets react adversely to bad news.

Our Sept/Oct Digital Magazine

The latest version of our client magazine is available on the Carrington Wealth Management website. www.carringtonwealth.com

Morningstar, the research company, has published its list of the worst-performing funds in the UK over the past five years, as follows:- 1. Rathbone Recovery Fund 48% cumulative loss over the last five years 2. Scottish Widows Investment Partnership UK Real Estate Fund 45% cumulative loss over the last five years 3. Manek Growth Fund 41% cumulative loss over the last five years 4. UBS UK Smaller Companies Fund 41% cumulative loss over the last five years 5. Neptune Green Planet Fund 41% cumulative loss over the last five years 6. Standard Life Select Property Fund 40% cumulative loss over the last five years 7. Aberdeen Property Share Fund 38% cumulative loss over the last five years 8. JP Morgan Global Financials Fund 37% cumulative loss over the last five years 9. SVM Global Opportunities Fund 37% cumulative loss over the last five years 10. Artemis European Growth Fund 35% cumulative loss over the last five years Morningstar OBSR Analyst Rating: Bronze These are the worst out of 1300 funds but looking at these figures in isolation doesn't mean much - for example, the worst performer has actually performed really well over the past three years i.e. since they changed the investment strategy. It all shows the folly of people trying to pick funds themselves - better results can be obtained by paying for the expert advice that my firm and others offer. Please note that past performance may be no guide to future performance and the capital value and income arising from asset-backed investments can fall as well as rise.