7 Jun 2017 11:37am

Securing an extra decade of comfortable returns

SPONSORED FEATURE: Rising life expectancy and low interest rates are stirring up a perfect storm for investors – but a few smart decisions could generate a sustainable income for an extra 10 years or more in later life

Caption: Investors who start earlier could achieve an even longer retirement in comfort.

One smart move open to investors is to choose an investment vehicle whose costs will eat up less of their income. According to data from Numis Securities, the average UK wealth manager charges 1.8% a year. The lower fees offered by some challenger brands could considerably extend the life of a pension pot.

Research by Netwealth shows that an investor aged 65 with a portfolio valued at £650,000 who chose to draw down £35,000 a year should expect to see their money last 24 years. But by selecting a more modern wealth management service, with all-in annual fees of around 0.8%, the money should last for 28 years.

Investors who start earlier could achieve an even longer retirement in comfort. For instance, a saver who invests a £250,000 pot at age 45, goes on to contribute a total of £700 gross a month until age 65 and then retires with an income of £35,000 a year, should expect the money to last 24 years with a traditional wealth manager. By using a more cost-effective, modern investment manager, however, they should secure their income for 40 years – an additional 16 years of income.

For an inexperienced investor, while the difference in annual charges might appear to be relatively small, it’s quite an eye-opener to realise it could provide them with an extra 10 years or more of comfortable retirement.

Challenger investment services, such as Netwealth, are able to keep costs down by combining the services of qualified advisers and experienced investment managers with modern technology. Netwealth dispenses with the extraneous aspects of a traditional service such as wood-panelled rooms, banks of salespeople and golf days, which drive up costs to the detriment of the end investor.

The effect of low charges could be even more powerful if used with other strategies for sustainable saving. An investor could choose to draw down a little less income every year, or to adjust drawdown regularly to reflect the changing value of the pension pot.

Netwealth also recommends that investors ask their wealth manager for the full details on fees – since often the all-in total cost is not fully disclosed – as well as understanding where their money is being invested. This includes looking at how diversified the investments are and ensuring the level of risk is appropriate to an individual’s financial goals.

More about Netwealth

Seasoned leadership team: We bring a very significant level of maturity and know-how to wealth management.

Cost effective: Netwealth makes use of the latest technology, allowing the total fee charges to be between a quarter to one third that of the industry average.

Comprehensive offering: Our powerful investment tools help you to plan for a variety of financial goals, including regular income, significant outgoings and pension drawdown. Investments can also be set up with the full suite of pension/SIPP, ISA and JISA wrappers in addition to general investment accounts, with the ability to automate future tax efficient investing.

Professional advice: Our qualified investment advisers can provide you with advice on how best to invest should you wish to speak with them.

Network benefits: The Netwealth Network allows clients to share the benefits of the service with their family and friends, with fee rates based on the combined amounts invested within the Network.

Security: Security is a critical part of the Netwealth service. All client assets are separately held in custody and ring fenced, and clients access their data via a dual factor authentication process.

Find out how we can help with your pension and investments at netwealth.com or call 020 3795 4784 to book a free consultation

Netwealth is authorised and regulated by the Financial Conduct Authority.

Remember that when investing the value of your investments may go down as well as up and that your capital is at risk.