When is it the right time to take a pension?

Hermanmunster_2

Shimrod wrote: »

I don't think it's attitude at all - although some of his replies can be a a bit brief and as such perceived as rudeness.

Remember, DunstonH is posting guidance and help here in his free time and it's not uncommon for the same questions to be asked several times a week so there is a reason for the brevity.

You can get a lot of help from these forums, but if you start a slanging match, especially as a new poster you'll find your request for help will just be ignored.

Ok thanks for the Advice

Hermanmunster_2

DiggerUK wrote: »

Hermanmunster, welcome to MSE, we seem to be about the same age. As you have found out, there are some here who regard themselves as beyond criticism.
Some describe such an attitude as arrogant, I make no comment.

But as to your question....
I will have to start by saying, that I regard personal pensions as the highest risk investment anybody can make, and have never recomended them. But as you have made that investment, you now have a decision to make.

If you think there are prospects of recovery or 'green shoots' then leave your pension as is, if not then it is time to cash in. And yes, my position is that there are no signs of recovery, and you should make safe what you can.

I would recomend gold if you don't need the cash right now. If gold is not for you then there are alternatives as I am sure you know.

Best of fortune.

Thank you DiggerUK for the assessment, very interesting. And the best of fortune to you too.

My thoughts are similar and disappointingly my pension will be worth peanuts if inflation runs riot. Taking it now will probably cost me 40% tax which is annoying. The devil and the deep blue sea for choice!

I can see it makes a lot of sense to be in gold but what form of investment in gold is best? I looked at Bullionvault and wondered if that was the way to go .Gold Mining shares i don`t understand it all looks a punt which I haven`t been into .Do you know the tax position on holding and selling gold and the best way tax wise to go into gold?


I agree with you on green shoots it is going to get worse before it gets better. American municipal cities are looking to be the next crisis forming on the horizon and the Europe saga continues. Commercial real estate in America and Europe also looks ready to pop. I think we are at a tipping stage where inflation looks to be on the horizon but deflation in asset values is likely when all the debt finally cannot be contained and assets need to be sold at knock down prices.

It is difficult for anyone to have a solid plan on anything other than some gold. But is that just another bubble!? I am still wary it might be. Trouble is for me in my scale of things I would have to purchase allot of gold because I am mainly cash at the moment and it’s a bit “all your eggs in one basket”. But the other baskets look very risky too.

Do nothing and inflation could be a killer even hyper inflation if they don’t stop printing.


I still favor property or land long term to hold onto something (bought and paid for property not leveraged) because it’s a solid item but it’s not looking good short term.

But will I live long enough to see it recover!

All good to muse over isn’t it.

Thanks for your reply

zygurat789

If you take an annuity now then you will have one more years worth of income than if you take it in a years time. Against this the fund may have risen in value, but certainly
by a lower amount than the annuity received and you will receive a (marginally) better annuity rate.
The result is that it takes a large number of years to recoup that first year not taken. I should think it's similar to the flat rate/indexed annuity comparison where it takes 15 years to break even.
Will you still care when you are 80?

jamesd

zygurat789, corporate bond and equity income funds paying 4-9% are available, with fair to excellent prospects of capital growth. A single life level annuity is likely to pay out more like 5.6% to a 60year old man or 2.9% with 5% a year growth. It's easy enough to get ahead by delaying taking the annuity when relatively young, like 60. It's harder as you get older.

Hermanmunster, commodities, including gold and silver, are high risk investments. Prices for them are also at very high levels and it's generally foolish to buy much of anything when prices are at record highs.

You might find this list of funds sorted by yield of interest. If you're interested in suggestions of some reasonable income options with reasonably stable capital value prospects from that list you might consider:

Newton Global High Yield Bond SIS - 8.74%
Artemis High Income R - 7.63%
Newton Higher Income SIS - 7.21%
Invesco Perpetual Monthly Income Plus - 6.73%
Invesco Perpetual High Income - 3.90% (but higher growth prospects)

Returns and capital values aren't guaranteed.

If you'd be paying 40% tax now you could take an income and use the part on which you'd pay 40% tax to make contributions to another pension to get 40% tax relief, a second go at the tax relief and tax free lump sum. Pension recycling rules limit how much you could do of this for lump sums but not income, except when done in conjunction with a lump sum.

zygurat789

jamesd wrote: »

zygurat789, corporate bond and equity income funds paying 4-9% are available, with fair to excellent prospects of capital growth. A single life level annuity is likely to pay out more like 5.6% to a 60year old man or 2.9% with 5% a year growth. It's easy enough to get ahead by delaying taking the annuity when relatively young, like 60. It's harder as you get older.

I always thought that the higher the risk the higher the return. 9% is, I think, a teensy bit higher than the current standard. Are they involved in drilling for oil in Manhattan?
When crystal ball gazing you should also be aware that there is a fair to excellent prospect of a total capital loss
and that it is also easy to lose out.
If you read the early posts you will see the OP is averse to risk, a subject you failed to mention in your post.
You may, with hindsight be proved right and, with the same hindsight you may also be proved wrong but I do think you should, at least, consider risk.

DiggerUK

Hermanmunster, I admire your optimism for the future, but for the here and now I'll give what pointers I can for gold exposure.

"Paper Gold" can be held in SIPPS as you do not take "pride in possession" of the physical gold, if you can SIPP your funds then consider it.
How you transfer is something I know little about, and can only point you in the direction of such outfits as Hargreaves Lansdown for guidance, there is a thread on them somewhere on MSE. You can make your own investment choices that could include mining equities.
Do you have a SIPP, it would give you total control of your pension pot if confident enough to go that road.

If there is any way you can get tax free cash out of your pot then use that to buy physical gold. As Sovereigns and Britannias are UK legal tender and CGT exempt, I would recomend that way to hold gold, especially as a higher rate tax payer.

Maybe one of the quantitative posters can advise you. They're quite cute and cuddly once you get to know them, and like me, dirt cheap.

Shimrod

DiggerUK wrote: »

If there is any way you can get tax free cash out of your pot then use that to buy physical gold. As Sovereigns and Britannias are UK legal tender and CGT exempt, I would recomend that way to hold gold, especially as a higher rate tax payer.

While I'm not going to dispute that the price of gold may still continue to go up (I don't have a crystal ball), with gold at an all time high why do you think it is a good idea to jump in now?

jamesd

zygurat789 wrote: »

I always thought that the higher the risk the higher the return. 9% is, I think, a teensy bit higher than the current standard. Are they involved in drilling for oil in Manhattan?

LOL, no. Here are the largest holdings for the AXA Pan European High Yield Bond fund:

AMERICAN INTERNATIONAL GROUP INC 8.625% BDS 22/05/ 1.80%
CAMPOFRIO FOOD GROUP SA 8.25% BDS 31/10/16 EUR1000 1.70%
INTERXION HOLDING 9.5% BDS 12/02/17 EUR1000`REG S` 1.60%
CARE UK HEALTH & SOCIAL CARE NEWCO 9.75% NTS 01/08 1.50%
BOMBARDIER INC 7.25% BDS 15/11/16 EUR1000 `144A` 1.50%
CHESAPEAKE ENERGY CORP 6.25% NTS 15/01/17 EUR1000 1.50%
PE PAPER ESCROW GMBH 11.75% BDS 01/08/14 EUR50000 1.50%
PROLOGIS EUROPEAN PROPERTIES 5.875% SNR NTS 23/10/ 1.50%
REXEL 8.25% SNR NTS 15/12/16 EUR `REG S`TR`2` 1.50%
LEVI STRAUSS & CO 7.75% BDS 15/05/18 EUR1000`144A` 1.50%

Percentages there are percentages of the total fund in each investment. So if Bombardier or Levi were to default completely - which implies going out of business with minimal money to pay creditors - 1.5% of the fund value might be lost.

zygurat789 wrote: »

When crystal ball gazing you should also be aware that there is a fair to excellent prospect of a total capital loss

Really? How? The maximum permitted holding in a unit trust is 5% of the value in one company so you're suggesting that in the easiest to achieve case, 20 different companies have to go bust and not pay out anything to investors. More normal is that it would take several hundred companies going bust to do that because funds don't have the maximum permitted amount in all investments. It's not completely impossible for this to happen but it's extremely unlikely even in a complete economic meltdown, since it requires just about every company on the UK stock market to go bankrupt with no payout to investors. Most of us will be unemployed and the government will have drastically cut pensions and benefits to most people at around the same time, while those holding gold will be wishing they had cigarettes and food instead. It takes truly extreme situations to lose everything when you're using unit trusts. It's much easier if you're using just share holdings in one company.

zygurat789 wrote: »

and that it is also easy to lose out.

That's certainly possible.

zygurat789 wrote: »

If you read the early posts you will see the OP is averse to risk, a subject you failed to mention in your post.

"If you're interested in suggestions of some reasonable income options with reasonably stable capital value prospects" is a description of risk. So were things in my previous post like:

"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."

zygurat789 wrote: »

You may, with hindsight be proved right and, with the same hindsight you may also be proved wrong but I do think you should, at least, consider risk.

I always consider risk when writing here. Every time, without fail.

Hermanmunster wrote "I put the fund into cash just before the recession in 2007". It's not clear when in 2007 that happened but assuming it was September then the RPI index in September 2007 was 208.0 and it was 224.5 in August 2010. That means that Hermanmunster has lost 7.3% of the money since then in buying power terms. That's not a situation that should be allowed to continue but the mixture of things done to avoid the ongoing losses can vary.

For comparison, the HSBC FTSE All Share Index tracker today is worth about 3% less than it was in September 2007, so going to cash saved that extra drop if that was what was held. Though there are investments that have grown by more than inflation since then. But cash surely saved many sleepless nights over the last couple of years.

Hermanmunster_2

jamesd wrote: »

LOL,
For comparison, the HSBC FTSE All Share Index tracker today is worth about 3% less than it was in September 2007, so going to cash saved that extra drop if that was what was held. Though there are investments that have grown by more than inflation since then. But cash surely saved many sleepless nights over the last couple of years.

Yes it did save a lot of sleepless nights at the time you are right. I had single years isa opened with the exact same spread of investments over the various funds as proposed to be put in the pension fund that was changed into cash at the time. It dropped by approximately 35-40 through the worst of it all and has just recently come back to just under the initial investment amount. Granted the RPI means inflation has eaten into that in both cases. A bigger worry to me is the way the pound has suffered against stronger (and some weak ) currencies over these last three years as on the world stage we are all down around 30% on what our money will buy. Some think their investments are holding up well but they are being debased on the world stage by our poor currency. Try moving to Singapore or Australia with your money and see what it buys now to what it did a few years back and you would see what I mean.

jamesd

From that ISA performance it looks as though you had a pretty high equity component. From the look of your writing you'd be a lot more comfortable now with only 30%-50% or so in equities. If you're comfortable with them at all.

You're right about the currency. I did pretty well from it since I decided to put more than 70% of my pension money in non-UK holdings and the reduction in exchange rate reduced the drops that I saw. For my biggest pension pot that kept the worst drop I saw to around 21%.

I think you made a good move to go into cash when you did, given your situation.