Suitable funds in Drawdown?

SeniorSam

Hi Folks,

I have a problem that possibly faces many as they get older. This year I will be starting to draw on my Sipp, probably phased drawdown and just taking the cash of about "10,000 p.a.- possibly £12-15 max?

I have a good State pension of just over £14,000 and my wifes (also 68) State pension is £7,204 and we have capital to generate other income as needed.

At age 68 now and starting late this year or possibly at the latest at age 69 next February, my concern is that the overall fund does not have a high risk and I believe that I need to move from the cash fund, that it has been in for the last few months due to market conditions, into other funds to help the growth.

I would appreciate some guidance or suggestions of low-medium risk funds that may be suitably safe ( as far as one can tell) for the next few years.

At present Sipp fund of £258,000 is with Friends Provident - James Hay in a Retirement Investment Bond, but I am quite prepared to look at moving elsewhere if this may be an advantage.

Also, if I only take the tax free element of the drawdown each year and don't buy any annuity for the time, can I convert part or the whole to annuity before 75 if I wish?

Any help would be appreciated. Thanks

Sam

EdInvestor

Hello SS

What is a Retirement Inveswtment Bond?

You can convert the whole or part of the drawdown fund to an annuity any time.

DavidLaGuardia

James Hay offer an excellent platform via eSIPP with a alrge range offunds (extended if you use an IFA) and even the opportunity to purchase infdividual shares. Not a trure SIPP but a very good vehcile for those not requiring bells and whistles they are no going to use and unlike such plans there is no admin feejust the costs as per the individal funds chosen thmeselves or a small fee for onlineshare trades.
There is also segmentation so individuals lumps can be used to buy annuties of varing sizes if you wish toi and when you wish to prvoding the funds are there

However and this is a big "HOWEVER". If you are needing to ask the questions you have done in this co,plex area, then you should not attempting this are yourself. As much as you might know about first aid, I assuming you wouldn't operate invasively on yourself by using a local anethetic. If you are convninced you are competent in some areas and what to save on the cost of advice use a fees based IFA who can agree with you a plan to meet your specificed needs require at a relaistic cost, otther wise you will botch it and miss things you were unaware of.

SeniorSam

EdInvestor wrote: »

Hello SS

What is a Retirement Inveswtment Bond?

You can convert the whole or part of the drawdown fund to an annuity any time.

EdInvestor....

This is the investment vehicle set up by Friends Provident that the four pensions were transfered into. The transfer cost was 7% (£20,815.91) of the total after the penalty cost of withdrawing on some pensions and two funds were initially selected but a few months ago moved into cash fund as the value was going down.

There were no initial charges paid to James Hay with the bond, which is split into 10,000 segments but I have recently requested information on costs if I start using the phased drawdown as mentioned.

If the James Hay charges are high, I am not sure if they will charge for leaving to go to another administrator with lower charges or if it's worth it.

Hope this helps you

Sam

EdInvestor

SeniorSam wrote: »

This is the investment vehicle set up by Friends Provident that the four pensions were transfered into. The transfer cost was 7% (£20,815.91) of the total after the penalty cost of withdrawing on some pensions and two funds were initially selected

Shocking, total ripoff. The whole point about SIPPs is that you can invest directly, there should be absolutely no need whatsoever for 'investment vehicles' like this - they are just an excuse for charging you extra money. :mad: [I accept that this was an early SIPP before the market had much competition and thus you were, to an extent, a sitting duck.]

Could you explain how you think phased drawdown works, and why you think it would be good for you?IMHO people managing their own drawdown need even more than most to keep it simple and to keep costs down.What do you see as the advanatge of going the more complicated and expensive route?

At this stage I suggest you simply ask for a transfer value of your fund.This would reveal any penalties or clawbacks you would have to pay for leaving.

Also, what were the two funds originally selected before the move into cash?

SeniorSam

EdInvestor wrote: »

Shocking, total ripoff. The whole point about SIPPs is that you can invest directly, there should be absolutely no need whatsoever for 'investment vehicles' like this - they are just an excuse for charging you extra money. :mad: [I accept that this was an early SIPP before the market had much competition and thus you were, to an extent, a sitting duck.]

Could you explain how you think phased drawdown works, and why you think it would be good for you?IMHO people managing their own drawdown need even more than most to keep it simple and to keep costs down.What do you see as the advanatge of going the more complicated and expensive route?

At this stage I suggest you simply ask for a transfer value of your fund.This would reveal any penalties or clawbacks you would have to pay for leaving.

Also, what were the two funds originally selected before the move into cash?

EdInvestor...

The two initial funds back in 1999 were Managed and European and they did well for a time, but markets change. Original investment £281297. I ten moved into the property fund but forgot about it and after going up, it went down until I switched to cash.

My thought one the phased was to take just the tax free cash in lumps of 10k t0 £15k max and on top of state pensions and a small occupational pension, make the rest of our need up from investments, possibly in investment bonds, taking 5% without tax. Converting to annuity by 75 or earlier if looking good?

The alternative thought was possibly a few small annuities, which I could take as single level for maximum return as there is eanough in other assets for my dear wife. However, with a 'normal' annuity I would look to take a 50% spouse and possible 5 year guarantee.

My wife's PPP of around £15k could be taken as single life also as I have enough should she go first.

Is my thinking 'reasonable' with the info you have?

Sam

EdInvestor

SeniorSam wrote: »

The two initial funds back in 1999 were Managed and European and they did well for a time, but markets change. Original investment £281297. I ten moved into the property fund but forgot about it and after going up, it went down until I switched to cash.

To be honest SS, I have to agree with David L-G. You should never have been moved into a Self Invested Personal Pension (SIPP) because you know nothing about investing and aren't interested.As a result you are losing money.

I suggest you find an IFA who specialises in investment and pay him a fee to sort you out - and to keep on monitoring your portfolio.

By all means come here and tell us what he suggests.

SeniorSam

Ed...... thanks for the advice. In some ways I agree with you and not haveing someone to monitor this investment has been my downfall. I will consider all options before taking action and may be back with other questions before I do.

Thanks again
Sam

sambrown_2

I have to say if I had followed my IFAs advice I would be many, many thousands of pounds poorer. Instead I changed my pensions into cash first, just before the crash then opened a cash SIPP. It costs little to run it as I didnt take the advice option which they try and push as then the charges run up.

Now the interest was fine on cash originally but now its not, I still have interest but its not what it was. Ive taken my lump sums, readied for drawdown and now its sitting there earning about 1.5% tax free but very small charges, ready if I need it.

I have no desire to go back into the stockmarket although the the SIPP holder Killik & Co offer a very professional service if I wanted to and I could feel confident with them. Im in a position fortunately where I have other income and this fund isnt my whole life and although the interest is low now, its under my control and not subject to market fluctuations

I wanted to keep it simple and reduce the number of "fingers in the pie" you may be different and desire larger returns. The returns on the stock market after charges are not what people think and what they are told unless you want significant risks, something not adviseable near retirement.

If your younger you may be able to renew your losses and many near retirement have suffered significant losses in the last 2-3 years which they will never make up.

I understand why people need IFAs as pensions are or can be a minefield and complicated but they are not if you sweep away the dross they send you.

An IFA is in business to make money and they will do that without having any come back if your investment fails. Its their interests first, yours second whatever they say, thats life, accept it.

The ONLY person to do it is yourself BUT you need to learn the system first and that takes time and patience, something you may not have if you leave it till retirement. The word is be careful, dont trust what you are told until you understand it first, otherwise you will be the poorer for it likely as not.

dunstonh

I have to say if I had followed my IFAs advice I would be many, many thousands of pounds poorer. Instead I changed my pensions into cash first, just before the crash then opened a cash SIPP. It costs little to run it as I didnt take the advice option which they try and push as then the charges run up.

Although many people are now back in surplus from pre-crash figures at amounts higher than cash.

An IFA is in business to make money and they will do that without having any come back if your investment fails. Its their interests first, yours second whatever they say, thats life, accept it.

There is a lot of comeback if investments fail to be within your risk tolerance.

Using drawdown in 100% cash may have the odd period when it looks like it pays off but long term it is highly unlikely to be best. You may as well go with an annuity with value protect.