£780k pot how much would you drawdown each year

GSP wrote: »

Although I haven't made any contributions since April 2916, does it make any difference that I transferred out of my db pension last Summer and started to drawdown.

No, that's a permitted transfer and something that can also be done with the protection in place. And since the protection is backdated to start from 6 April 2016 that's actually how it would be viewed anyway.

Unfortunately I wouldn't be getting anywhere near a pot size of £780 until i'm around 63 however I don't see myself waiting that long to start accessing my fund. I remember my father on retirement at 65 in the 1980's saying that he's just come into the good money (from work) when he felt a little too old to enjoy it fully! Of course, we all have different needs and goals and to put these yearly withdrawal figures into perspective perhaps we should view them in the context of a proportion of current net income? I'm aiming for at least two thirds of net final salary and if things go according to plan more like 1.5 x net income before 60.

I agree with the post to draw out fully through the 20% band and there is possibly an argument to just sneak into the 40% band (if that would qualify you for higher tax relief on ongoing £4k contributions?). If you haven't taken your TFLS then 25% is available on every withdrawal which means that when the pa is £12k5 you could draw down £66k6 for as little as 11.25% tax. That's just under £5k / month net! Given that a balance must be drawn between your fund getting so large >£0.9M and exposing yourself to tax on the pot or significant 40% tax on the withdrawals I am inclined to 'retire' earlier and enjoy the money. Whatever you don't need can go into ISAs (to build up a 2 year plus cash slush fund to minimise exposure to market downturns) or to the kids to help them get on the property ladder, pay for HE etc. I am very much of the opinion that helping them (but not financing them) whilst I'm alive is much more preferable for them (otherwise they'll not want to see me head towards my 90's) and me!

In my calculations I also intend to run down my pot completely by 85 (if I make it as far as my father...). I want to have most money available from 60 - 70, then slightly less from 70 - 80 and then if I have made it that far have just enough to keep me (and the wife hopefully) warm, dry and fed during the run in.... Again, if all goes to plan, there should be plenty in ISAs from the early withdrawals to draw on in emergencies especially with a full new state pension to take up quite a lot of the slack from 67 onward.

One thing I don't quite understand though is natural yield in the region of 3% - 5%? My fund(s) on average are growing around 10% before contributions. So to me that means if I take out the 10% growth the fund really isn't reducing. Hence to me the natural yield figure of around 3%- 5% seems very conservative. Am I missing something? By my calculations once your fund has gone over £0.5M creaming off the £50k natural growth each year (and probably some capital too) allows (for me) quite a comfortable life style.

Thanks for your reply. Unless the markets crash immediately after first accessing a pension surely squirrelling away a minimum of two years 'drawdown buffer' supports an annual withdrawal in excess of the 'natural yield'? Also, from my basic understanding of shares even dividends are not guaranteed and I would expect them to decrease in line with a reduction in share (pension fund) value? Regarding running out of pension fund, my current model does empty my pension fund by 85 however my reasons for doing this by then is because all I will be financing is the basics, food, council tax, heating (I have solar..), etc... I do start with a draw down in excess of my current net pay so I'm expecting to have cash savings too. The full state pension isn't such a meagre sum to live off from 85 especially if I haven't blown everything that I've drawn down since 59 and my daily thrills from 85 are finding the remote control and going to the bathroom by myself! Hence I've front loaded the pension withdrawals. Based on the this, do you still think I need to re-plan?

jamesd wrote: »

Markets bounce back up again, typically within a year or three. So to get the lifetime allowance benefit you need to crystallise during the down time, not wait. Which means crystallising all that remains if a drop comes along at a convenient time.

But (unless I misunderstood) you were suggesting planning a phased crystallisation over 4 years (25% each year). If a drop comes, why should one throw that plan out of the window and crystallise everything that's left immediately? If that's a good idea now, when the funds are much less than the LTA, wasn't it an even better idea when they were not so much less?

Gerbert wrote: »

But (unless I misunderstood) you were suggesting planning a phased crystallisation over 4 years (25% each year). If a drop comes, why should one throw that plan out of the window and crystallise everything that's left immediately? If that's a good idea now, when the funds are much less than the LTA, wasn't it an even better idea when they were not so much less?

The main purpose of the 25% was to give time for a big drop to show up, while also not allowing too much waiting and growth if one doesn't come along fairly soon.