When is it the right time to take a pension?

Hermanmunster_2

Does one draw on a personal pension at 60 if you don’t really need the money?

I put the fund into cash just before the recession in 2007 and it hasn’t lost money but isn’t making any.

With annuity rates falling do I take it now and hope I live long enough to get a fair bit back off it?

Or try and invest it again to make more in what seems a perilous market?


I read you have to be conservative and keep in cash near the end of your pension?

Anyone with a similar dilemma and a thoughts:eek: on what they did or will do?

dunstonh

Does one draw on a personal pension at 60 if you don’t really need the money?

Depends if it fits your financial position or not. By cystallising the pension you take a fund that is tax free and bring it in to a taxable environment. You also reduce the death benefits.

I put the fund into cash just before the recession in 2007 and it hasn’t lost money but isn’t making any.

Most people who left themselves invested through it are now back above where they were in 2007. So, that action may have cost you more than you saved. its not uncommon for people trying to chase the markets to end up losing more money than leaving alone.

With annuity rates falling do I take it now and hope I live long enough to get a fair bit back off it?

Annuity rates fell to reflect interest rates and the impact on gilt yields. That is largely priced in now. Unless you think there are further drops likely.

Or try and invest it again to make more in what seems a perilous market?

What market are you referring to you? the stockmarket isnt. That is just being what it always is. However, if you take a 1-10 risk scale, you are currently in risk 1. Why would you want to jump up to risk 7. What about the options in between.

I read you have to be conservative and keep in cash near the end of your pension?

If annuity purchase is likely then generally you aim to reduce the risk the closer you get to retirement.

Anyone with a similar dilemma and a thoughts:eek: on what they did or will do?

There is no one size fits all answer here. What is right for one person will not neceessarily be right for another as personal cirucmstances come in to play. However, if you want a generalisation, then it is that you dont crystallise a pension if you dont need the money.

Hermanmunster_2

dunstonh wrote: »

Most people who left themselves invested through it are now back above where they were in 2007. So, that action may have cost you more than you saved. its not uncommon for people trying to chase the markets to end up losing more money than leaving alone.

I wasn’t chasing the market I had had it with the same company for 27 years but foolishly got talked into moving it by a very slick salesman. The changeover happened at about 6700 FT and by fluke and the inkling I got for the impending subprime crisis having just visited America at that time I decided to park it in the cash fund temporarily! After that it was all downhill with the FT .If I had been smart I would have put it back on the market at the 3500 but I am not and I was scared like many others. It’s now back to 5500 so I am not much out but more by good luck than any plan. But it could have stayed down for a good long time like it did in the 1930s and I would have lost 40% of my value nearing retirement. It’s easy for a financial advisor to say with the benefit of hindsight that the market would come back and there is nothing to worry about you fool .But there have been a lot of very worried people about this last three years and it is well known that the whole system nearly collapsed .At least I didn’t have the anguish of watching my fund totally collapse albeit being a fact that things have come back somewhat .

dunstonh

It’s now back to 5500 so I am not much out but more by good luck than any plan.

Most decent funds/portfolios would not be 100% UK equity. It would be mixed asset. If you were poorly invested with 100% UK Equity (which you are not but others may be or may be thinking about it) then you would be worse off.

It’s easy for a financial advisor to say with the benefit of hindsight that the market would come back and there is nothing to worry about you fool .

Thats nice. You sign up up on the board and by your second post you are being rude. That is really going to encourage people to help you.

Hermanmunster_2

dunstonh wrote: »

Most decent funds/portfolios would not be 100% UK equity. It would be mixed asset. If you were poorly invested with 100% UK Equity (which you are not but others may be or may be thinking about it) then you would be worse off.



Thats nice. You sign up up on the board and by your second post you are being rude. That is really going to encourage people to help you.

I was not being rude to you dunstonh. If you read the sentence again you have totally got the wrong end of the stick.

“It’s easy for a financial advisor to say with the benefit of hindsight that the market would come back and there is nothing to worry about you fool”

That is actually a general terminology for any financial advisor and the fool element refers to me personally.

I am referring to the insinuation of me being the fool in your reply. You didn’t say it in as many words but you might as well have done and that I was wrongly and foolishly chasing the market. And that I should have known it would come back and all would be ok.

My reply pointed out that I was not trying to be clever it was a fluke I ended up in cash.

At the time I was scared to death at the way my pension and savings may all be going to go down the drain in a possible bust currency with busted banks.

For you to reckon in your attitude to have a superior knowing that it would all come back is easy with hindsight but no one was certain at the time as there was some grim faces on top billionaire investors let alone ordinary people .

I actually thought that although choosing your words carefully you were rude and condescending to me with your reply and in your keenness to get in early on the answers I think there is tendency for you to block other views by ordinary people on the forum who are not financial advisors who perhaps have valuable input about how your heart and hunches feel about situations.

Your superior financial advisor attitude as I can appreciate you are very knowledgeable chap sort of seals the thread and makes it difficult for an ordinary forum member to have some say without being belittled by your obviously superior knowledgeable replies or input.

Perhaps you get a kick out of being knowledgeable and superior with a holier than thou condescending attitude. It certainly looks that way.

jamesd

dunstonh, you appear to have misread the post.I read it as Hermanmunster described, No surprise that you'd make this mistake when you are often attacked here unjustly, though.

jamesd

Hermanmunster wrote: »

Does one draw on a personal pension at 60 if you don’t really need the money?

Maybe, but one doesn't need to buy a annuity to do this. Even if buying annuities, it doesn't need to be the whole lump sum at the same time, it could be say £10,000 of annuity purchase a year and the corresponding £3333 of lump sum put into investments within a S&S ISA to provide ongoing tax free income. Assuming that you're in good health, income drawdown could be used as well, that would allow you to take out more income at your age than an annuity and you could use that to move the money into a S&S ISA where it's available as a lump sum if desired, but keeps the growth potential if not used for anything other than income.

Hermanmunster wrote: »

With annuity rates falling do I take it now and hope I live long enough to get a fair bit back off it?

Annuity rates are affected by these factors, among others:

1. Cost of buying gilts and high quality corporate bonds. There's been a huge surge of buying of these driven by fear and this has reduced the income that any particular lump sum can buy. This reduction is likely to drop and produce higher income as developed economies recover.
2. New regulations may require insurance companies to hold more capital, reducing their investment returns and hence reducing how much they pay out.
3. You get older, which normally increases payouts.
4. You might become less healthy and get an increased payout because of this.

Hermanmunster wrote: »

I read you have to be conservative and keep in cash near the end of your pension?

This guidance assumes that you have a cliff date where you have to sell all of the investments, whatever state the market is in, and buy an annuity. A market drop just before that could cause you to be locked in to a lower value for life in this scenario. It doesn't need to be all cash, it can just be a less volatile mixture than all emerging markets funds, say. A mixture of cash, corporate bond funds, strategic bond funds, commercial property funds, UK equities, various global equities and perhaps some alternative investments in a mixture tailored so that the overall up and down movement is likely to be reasonable for your taste is how it'd normally be done, not just 100% cash except when very close to buying the annuity.

But it's completely unnecessary to have a fixed cliff date when you buy an annuity. So you can stay invested in a mixture of investments and decide to spend some of the money on an annuity when you think that the market looks favourable. Or perhaps spend 5-10% of the pension pot value each year on an annuity and leave the rest invested, so your income gradually becomes more certain over time, while eliminating the cliff and still getting the potential for growth.

Hermanmunster wrote: »

Or try and invest it again to make more in what seems a perilous market?

Perilous markets are an opportunity to buy at good prices and share prices aren't high at the moment, even though they have been lower. Government bond and high quality corporate bond prices do look expensive for me and I'm personally not keen on taking the risk of those at present, though normally they are good for reducing up and down movement.

Hermanmunster wrote: »

Anyone with a similar dilemma and a thoughts:eek: on what they did or will do?

You've been comfortable with cash so that implies to me that you like risk reduction and would sleep better with a fair amount of income that is predictable. I suggest that you start out by planning to put 10% of your pension pot into annuity purchase each year and reinvest the rest in a medium or medium-low mixture of investments. Possibly use an initial higher than 10% amount or more than one 10% chunk this year if you want more certainty quickly.

In addition, you might consider using income drawdown and putting the income from that into purchasing comparable investments within an S&S ISA to try to gradually shift your income to a capital sum that you could draw on in an emergency such as medical need.

This way you'd be hedging a fair range of risks, from changing annuity rates through stock market performance and potential need for capital access. You could also use a range of annuity providers to diversify the risk of trouble with them and help you to sleep more easily when there's talk of strife for insurance companies.

I'm assuming that 10% chunks would be £10,000 or more.

jem16

Hermanmunster wrote: »

I was not being rude to you dunstonh. If you read the sentence again you have totally got the wrong end of the stick.

“It’s easy for a financial advisor to say with the benefit of hindsight that the market would come back and there is nothing to worry about you fool”

To be fair to Dunstonh, your post was quite difficult to follow. A lack of punctuation can alter the meaning entirely.

That is actually a general terminology for any financial advisor and the fool element refers to me personally.

I can see an IFA saying that the market would come back and that there is nothing to worry about. However if my financial adviser referred to me as "you fool" I'd be telling him where to go! I can't see that as general terminology.

Your superior financial advisor attitude as I can appreciate you are very knowledgeable chap sort of seals the thread and makes it difficult for an ordinary forum member to have some say without being belittled by your obviously superior knowledgeable replies or input.

I have never yet found anyone not wanting to post simply because Dunstonh has replied. If anything some posters want to post simply to attempt to prove him wrong.

The reason you haven't got more replies is that no-one has a similar dilemma as every case is different.

Perhaps you get a kick out of being knowledgeable and superior with a holier than thou condescending attitude. It certainly looks that way.

A little unfair. Dunstonh has provided considerable help for a lot of people here. Perhaps as a new member you haven't really looked at a lot of other threads.

Yes it does appear as though Dunstonh has misunderstood your reply but I think you have gone a bit over the top in your reply. Perhaps you have misunderstood his intentions?

Hermanmunster_2

Cannot see how to post it as you request because i am new to posting sorry .

jem16

Hermanmunster wrote: »

Perhaps, as he misunderstood me?

Your reply is very difficult to follow as your replies are mixed in with what I said and it looks like it was my quote - perhaps you can edit it please?

However I'll try to reply.

Others understood it perfectly well

Only one poster apart from me has replied. I had to read Post 3 more than once to be sure what you said. James has also said that he can see why Dunstonh has read it wrongly.

jamesd wrote: »

No surprise that you'd make this mistake when you are often attacked here unjustly, though.

I accept your view but I felt my reply was equal to his accusation to me of being rude and calling him a fool when in fact he had not read it properly as I was referring to myself as the fool

I didn't realise it was a competition.

lvader

Dunstonh is a financial advisor, it sounded like you where having a pop at him or at the very least his profession.