How does evidence-based investing approach market timing?

Evidence-based investing generally discourages market timing, which involves trying to predict the best time to buy or sell investments based on short-term market movements. Instead, evidence-based investors focus on a disciplined, long-term investment strategy and avoid making reactive investment decisions based on market timing, which research has shown to be challenging to consistently achieve.

What role does cost play in evidence-based investing?

Cost is an important consideration in evidence-based investing. High costs, such as excessive fees and expenses associated with actively managed funds, can significantly erode investment returns over time. Evidence-based investors prioritize low-cost investment vehicles, such as index funds or ETFs, to maximize their long-term returns.

How does evidence-based investing address market fluctuations?

Evidence-based investing recognizes that market fluctuations are a normal part of investing and cannot be predicted or consistently exploited. Instead of reacting to short-term market movements, evidence-based investors stay focused on long-term goals, maintain a well-diversified portfolio, and adhere to their predetermined investment strategy.

What role does diversification play in evidence-based investing?

Diversification is a key component of evidence-based investing. It involves spreading investments across different asset classes, sectors, regions, and securities to reduce the impact of any individual investment's performance on the overall portfolio. Diversification helps manage risk and increase the probability of capturing market returns.

How does evidence-based investing differ from active investing?

Active investing involves attempting to outperform the market by actively buying and selling securities based on market trends, individual stock analysis, or other strategies. In contrast, evidence-based investing focuses on long-term market returns and emphasizes diversification, asset allocation, and a passive investment approach using low-cost index funds or exchange-traded funds (ETFs).

What are the benefits of evidence-based investing?

Evidence-based investing offers several benefits, including: Higher likelihood of achieving long-term investment goals Lower costs compared to active management strategies Reduced reliance on market timing and individual stock selection Improved diversification and risk management Alignment with academic research and evidence, providing a disciplined approach to investing

What is the primary principle behind evidence-based investing?

The primary principle of evidence-based investing is the belief in the efficiency of markets. It suggests that markets are generally efficient, and it is difficult to consistently outperform the market through active management or stock picking. Instead, evidence-based investing focuses on capturing the long-term returns of the market as a whole through diversified, low-cost investment strategies.

What is evidence-based investing?

Evidence-based investing is an investment approach that relies on empirical evidence and academic research to guide investment decisions. It involves using data and evidence from historical market behaviour to make informed investment choices, rather than relying on speculation or market timing.

I have heard about pension scams? Should I be concerned?

There are different types of pension scams but they can all lead to you losing a lifetime’s worth of savings in a moment. Since April 2015 you have more choices about how you can access your pension pot than in the past. Scammers know this and will try to lure you with promises of upfront cash, early acceess to your funds, one-off ‘deals’ with guaranteed high returns. Taking money out of your pension early can result in tax charges of more than half the value of the money you take out. You can find out more about spotting and avoiding pension scams from The Pensions Regulator

What is s pension commencement lump sum?

When you can start drawing benefits from your pension scheme, you may be able to take part or all of your pension benefits as a tax-free cash lump sum (called the pension commencement lump sum (PCLS)). If you’re a member of a defined benefit pension scheme, the scheme’s rules will determine how much you can receive as a PCLS. If you’re a member of a defined contribution (DC) pension scheme, you will normally have the option to take up to 25% of the value of your pension pot as a PCLS.

Can I protect myself against a lifetime allowance tax charge?

Transitional protection will be available for those who think they are likely to be caught by the life time allownace and might otherwise be liable to a tax charge. Two forms of protection will be available: Fixed Protection 2016 and Individual Protection 2016. They are modelled on the protections introduced when the lifetime allowance was reduced from £1.5m to £1.25m in 2014, and the same conditions and restrictions generally apply to them. Applications can be made online from July 2016. Fixed Protection 2016 (FP16) will work in the same way as both of the previous versions of fixed protection. It will give an individual who applies for it a protected lifetime allowance of £1.25m, reverting to the standard lifetime allowance if it is increased to above £1.25m at any point in the future. Individual Protection 2016 (IP16) is a bit more straightforward than for FP16, but the way it operates is a bit more complicated. In order to apply for IP16 an individual needs to have pension savings worth in excess of £1m on 6 April 2016 made up of their savings in registered pension schemes as well as any savings accrued in a “relieved non-UK pension scheme” (provided they are a “relieved member” of the scheme). They cannot have primary protection, but they can have any of the other existing types of lifetime allowance protection IP16 will give those who successfully apply for it a personal lifetime allowance equal to the value of their pension savings on 6 April 2016, subject to a cap of £1.25m. As with FP16, if the standard lifetime allowance increases in future beyond £1.25m IP16 will cease to have effect.

What is the benefit of cashflow planning for pensions?

Cash flow planning allows you to reflect on your current financial position, relative to your preferred position and your personal aspirations. This is then projected forward, year by year, using certain assumptions for growth, income/withdrawals, inflation, and interest rates. Watch the video to find out how cash flow planning can help you on your financial journey. https://www.youtube.com/watch?v=O4nNqQDb9EE

How much is the UK State Pension?

State pension to rise by 10.1% as the 'triple lock' is guaranteed from April 2023. The full new State Pension will be £203.85 per week. The only reasons you can get more than the full State Pension are if: you have over a certain amount of Additional State Pension you defer taking your state pension You will not get your new State Pension automatically - you have to claim it. You should get a letter no later than 2 months before you reach State Pension age, telling you what to do.

How much of a pension do I need?

When considering how much you’ll need to retire, the phrase ‘how long is a piece of string’ springs to mind. The answer depends on what the money’s going to be used for and how long it needs to last you. The exact amount you’ll need to live comfortably will depend on your expectations and circumstances, and how much you’re willing to compromise. It’s estimated that you’ll need around 70% of your final salary to maintain your lifestyle once you retire.

What is an Enhanced lifetime allowance?

If you’ve been working abroad, then you might qualify for the benefits of the LTA Enhancement That’s because the Lifetime Allowance (LTA) is available to anyone who has contributed to their UK pension whilst they’ve been working overseas. the LTA Enhancement is great news for UK non-residents. As all those tax payers who have been contributing to a UK pension scheme whilst working abroad (and being tax resident overseas) have not had access to the UK’s tax relief on their pension contributions, as they have been paying their income tax in a different country’s tax system. Which is possibly why it was felt that it has been unfair to apply the British LTA and the corresponding tax charges to this part of an individuals pension saving, if they are paying income tax overseas. So the non-residence based LTA enhancement provision (sections 221-223 of the Finance Act 2004) now compensates these taxpayers by increasing their LTA.

How do I find a lost pension?

It’s important to track down all the different pension schemes you’ve paid into, so that you can be sure you’re claiming everything you’re entitled to in retirement. Some important things to note: If you are frojm the UK and you left the employer between April 1975 and April 1988, you will have a pension, provided, you were over age 26 and had completed five years in the scheme. If not, you will almost certainly have had a refund of your pension contributions and have no further rights. If you left the employer after 1988, you will be entitled to a pension, as long as you completed two years’ service. If you left the pension scheme with fewer than two years’ service, you probably received a refund of your contributions at the time you left. A financial adviser can help track down lost or dormant UK pensions. There is also a new service which is run by the DWP that can help individuals track down pensions. You can find details on the pension tracing service here: https://www.gov.uk/government/news/new-pension-tracing-service-website-launched

When would a pension transfer be a good option to consider?

Your current provider doesn’t offer the type of pension you want. For example flexibility may be more important to you than a guaranteed income from within a final salary scheme You have a number of different pensions and wish to consolidate them into one pot You are seeking more control over your pension and what it is invested in Your Defined benefit scheme may be in deficit You reside overseas and wish to move your pension outside of the UK Potential tax advantages and the use of Double tax treaties You are due a large pension from your DB scheme and the benefits payable by the PPF (in the event it enters the PPF) would be less The options in relation to succession planning may be greater following a pension transfer. It may be advisable to transfer if you are going to be affected by the lifetime allowance

Can I transfer a pension that is already in drawdown?

Generally yes, however If your current pension is in Capped Drawdown, it will move into flexi access drawdown. And so you will become subject to the Money Purchase Annual Allowance (MPAA). You cannot transfer an annuity to a QROPS or SIPP or other flexible product. If you are already in receipt of a final salary/DB scheme you can no longer transfer these benefits. You can generally transfer at any time up to a year before the date that you are expected to start retirement. The scheme normal retirement age (NRD)

FAQs Archive - Page 2 of 3 - Jessica Cook in Partnership with AES Wealth

Published On: May 29, 2023|0.3 min read|
How does evidence-based investing approach market timing?

Evidence-based investing generally discourages market timing, which involves trying to predict the best time to buy or sell investments based on short-term market movements. Instead, evidence-based investors focus on [...]
Read more
Published On: May 29, 2023|0.2 min read|
What role does cost play in evidence-based investing?

Cost is an important consideration in evidence-based investing. High costs, such as excessive fees and expenses associated with actively managed funds, can significantly erode investment returns over time. Evidence-based [...]
Read more
Published On: May 29, 2023|0.2 min read|
How does evidence-based investing address market fluctuations?

Evidence-based investing recognizes that market fluctuations are a normal part of investing and cannot be predicted or consistently exploited. Instead of reacting to short-term market movements, evidence-based investors stay [...]
Read more
Published On: May 29, 2023|0.2 min read|
What role does diversification play in evidence-based investing?

Diversification is a key component of evidence-based investing. It involves spreading investments across different asset classes, sectors, regions, and securities to reduce the impact of any individual investment's performance [...]
Read more
Published On: May 29, 2023|0.3 min read|
How does evidence-based investing differ from active investing?

Active investing involves attempting to outperform the market by actively buying and selling securities based on market trends, individual stock analysis, or other strategies. In contrast, evidence-based investing focuses [...]
Read more
Published On: May 29, 2023|0.2 min read|
What are the benefits of evidence-based investing?

Evidence-based investing offers several benefits, including: Higher likelihood of achieving long-term investment goals Lower costs compared to active management strategies Reduced reliance on market timing and individual stock selection [...]
Read more
Published On: May 29, 2023|0.3 min read|
What is the primary principle behind evidence-based investing?

The primary principle of evidence-based investing is the belief in the efficiency of markets. It suggests that markets are generally efficient, and it is difficult to consistently outperform the [...]
Read more
Published On: May 29, 2023|0.2 min read|
What is evidence-based investing?

Evidence-based investing is an investment approach that relies on empirical evidence and academic research to guide investment decisions. It involves using data and evidence from historical market behaviour to [...]
Read more
Published On: September 10, 2021|0.5 min read|
I have heard about pension scams? Should I be concerned?

There are different types of pension scams but they can all lead to you losing a lifetime’s worth of savings in a moment. Since April 2015 you have more [...]
Read more
Published On: September 10, 2021|0.5 min read|
What is s pension commencement lump sum?

When you can start drawing benefits from your pension scheme, you may be able to take part or all of your pension benefits as a tax-free cash lump sum [...]
Read more
Published On: September 10, 2021|1.3 min read|
Can I protect myself against a lifetime allowance tax charge?

Transitional protection will be available for those who think they are likely to be caught by the life time allownace and might otherwise be liable to a tax charge. [...]
Read more
Published On: September 10, 2021|0.3 min read|
What is the benefit of cashflow planning for pensions?

Cash flow planning allows you to reflect on your current financial position, relative to your preferred position and your personal aspirations. This is then projected forward, year by year, [...]
Read more
Published On: September 10, 2021|0.4 min read|
How much is the UK State Pension?

State pension to rise by 10.1% as the 'triple lock' is guaranteed from April 2023. The full new State Pension will be £203.85 per week. The only reasons you [...]
Read more
Published On: September 10, 2021|0.4 min read|
How much of a pension do I need?

When considering how much you’ll need to retire, the phrase ‘how long is a piece of string’ springs to mind. The answer depends on what the money’s going to [...]
Read more
Published On: September 10, 2021|0.8 min read|
What is an Enhanced lifetime allowance?

If you’ve been working abroad, then you might qualify for the benefits of the LTA Enhancement That’s because the Lifetime Allowance (LTA) is available to anyone who has contributed [...]
Read more
Published On: September 10, 2021|0.9 min read|
How do I find a lost pension?

It’s important to track down all the different pension schemes you’ve paid into, so that you can be sure you’re claiming everything you’re entitled to in retirement. Some important [...]
Read more
Published On: September 10, 2021|0.7 min read|
When would a pension transfer be a good option to consider?

Your current provider doesn’t offer the type of pension you want. For example flexibility may be more important to you than a guaranteed income from within a final salary [...]
Read more
Published On: September 10, 2021|0.5 min read|
Can I transfer a pension that is already in drawdown?

Generally yes, however If your current pension is in Capped Drawdown, it will move into flexi access drawdown. And so you will become subject to the Money Purchase Annual [...]
Read more

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