Unsecured pension/income drawdown

chickalittle

Hi, please can anyone help? I have 3 private pension pots, £15k, £5k & £40k.
I would ideally ( as I am now able to) withdraw 25% tax free lump sum from the two smaller pots but I don't wish to take an annuity at this time with the balance. My understanding from the changes to pensions that I should be able to do this. However, the two providers concerned (GE Life and Prudential) both tell me that I must take an annuity. GE Life said that I needed an fund of £100k for their income drawdown plan. I have spoken with my other pension provider ( Norwich Union) who offer an unsecured pension plan with a minimum of £10k but that I have to make the arrangements thru an IFA. I have now contacted 3 IFA;s who have refused to handle this! They say the charges on the amount I am looking to transfer in to such a plan is not viable ( although if this is the case - why do NU offer a £10k plan)

I had thought to leave my largest pot alone for the time being and let that continue to grow.

Has anyone had any experience of trying to take the TFLS but not take an annuity - I am happy to let the balance to continue being invested and hopefully grow until such time I wish to take an annuity. Can anyone point me in the direction of how I arrange this? Thanks.

ReportInvestor

Companies don't have to offer this facility.

Then again, you don't have to have keep private pension with these companies .

But check for any guarantees, penalties before moving.

SIPPs are one option to consider.

EdInvestor

Move your money to a low cost online SIPP such as

https://www.sippdeal.co.uk
https://www.hargreaveslansdown.co.uk
https://www.alliancetrust.co.uk

and you will be able to proceed as planned with no IFA and no problem.

Try the SIPP board at https://www.fool.co.uk for help on which one to choose, plenty of experienced drawdowners over there.

dunstonh

Income Drawdown is considered a high risk transaction by the FSA and many IFAs will not transact in high risk areas.

SIPPs are currently unregulated and there are concerns that some of these low cost providers will have to charge more when regulation comes in next year as the FSA rules will force them to put almost a years profit into their reserves.

A lot of amateur drawdowners dont realise the risks of drawdown and many who have done it have never experienced a stockmarket crash and have only seen good years.

ReportInvestor

dunstonh wrote:

A lot of amateur drawdowners dont realise the risks of drawdown and many who have done it have never experienced a stockmarket crash and have only seen good years.

It's true. The good years can warp even the best people's judgements :rolleyes:

dunstonh wrote:

a return of 20% over a year is easily achievable on medium/high risk funds/portfolios.

dunstonh

I dont know why you highlight that comment? A return in excess of 20% is easily achievable in a period of one year. I have never said every year or on average. Just that some years a higher risk portfolio will get returns in excess of 20% whereas a low risk portfolio doesnt have the volatility to achieve that. Keep the quotes in context.

There are an awful lot of amateur investors out there who have only seen good times, had good returns and they think that makes them experts. I dont think we suffer it too much on this website but the MF does have its fair share.

I quite like drawdown as an option. I think more people should use it than perhaps currently do. However, its very easy to get carried away with the advantages and ignore the disadvantages. The last investment product that did that was called endowments.

chickalittle

Thanks for the info- will check the sites mentioned ( takes care of my Sunday evening!)

Just as an extra - if I go ahead with transferring to one of these companies SIPPs. Do I open the SIPP first, take my 25% out of my pots and then transfer the balance into the SIPP or do I tansfer the whole lot over and then take the 25%. Or does it not matter? - I just seem to have a vague recollection of reading something about "an event" and people being caught out when transferring funds after taking TFLS.
Thanks again,

EdInvestor

Move the money to the SIPP first then take the 25%.

The performance of your drawdwon will of course depend on market behaviour and the way you invest it.

margaretclare

dunstonh wrote:

A lot of amateur drawdowners dont realise the risks of drawdown and many who have done it have never experienced a stockmarket crash and have only seen good years.

Surely anyone who's old enough to have a SIPP in drawdown will have lived through a stock-market crash before? It goes up, it goes down, one accepts that, but overall, leave it long enough and it does pretty well.

Margaret

dunstonh

Surely anyone who's old enough to have a SIPP in drawdown will have lived through a stock-market crash before? It goes up, it goes down, one accepts that, but overall, leave it long enough and it does pretty well.

They have become more popular in the last couple of years. Those that started it in that period havent seen a crash.

The risk is a stockmarket crash at age 74. A 40% drop then could be a disaster for someone of that age as they dont have the years to wait for it to recover. A managed portfolio would see the risk of the portfolio being reduced as age 75 gets closer. A novice investor on a DIY drawdown may not realise that they need to do that or they may have lost interest or they keep putting it off... until it is too late.

Like any transaction, you must know the risks involved before you decide. If you know and understand the risks and choose to do it, then that is fine. Its the people that dont know the risks and go into it that I am concerned about and there are a good number of those.

I think the FSA over states the risk on drawdown. However, i think sites like MF understate the risks. Its just a case of understanding what the risks are and making sure you accept the consequences. Thats all.