Metlife Retirement Portfolio

dunstonh

I concur with above answers. You dont need much of a return to hit what you need. A sensible level of risk should suffice. Every option has risk. Even guaranteed ones. The guaranteed ones have the risk that the higher costs will erode the returns which make the chances of long term growth and income lower than a more conventional multi-asset portfolio.

I have seen these third way style products come and go. One compliance network is doing a review of all advised cases with metlife as they have concerns. I believe, but cant be 100% that is because the way charges were taken (by sale of units and the guarantee only applied to the units not the value - so an ever decreasing number of units would see an ever decreasing guarantee).

Frequently, the best solutions are the simplest ones. Over complicated products that promise much tend to result in little.

Ribin

jamesd wrote: »

But that's a guess, because I don't know what the other pensions are or how much they pay and when they start, nor your age. If you tell use more about that it'd be possible to give a better idea.

Age 58 next April, Married, Income requirement now circa £20k. Additional pensions - Final Salary Pension of circa £10k p.a in 2019 time RPI linked, my state pension in 2022 and Wife's in 2026. Not too concerned at leaving money for the kids as they are major beneficiaries under a family trust set up by my Dad

kidmugsy

Ribin wrote: »

My goal is to maximise income over the next 10 years (before other pensions come on stream) whilst maintaining a minimum income guarantee of £11k from this pension pot ...

If you really do want to "maximise income" then the thing to avoid is a 100% investment in equities, which might collapse just before a three-year GAD calculation. Also, if you want the investment to last (on average) less than ten years, equities may be a bit risky.You might even consider crystallising in three goes, so that there is one new GAD calculation every year, giving you some protection from market slumps.

Another view would be that once your other pensions have started, they provide an income stream like index-linked bonds, so you could diversify your portfolio by putting your residual pension pot largely into equities then, to see you and your widow out. Perhaps at the present you might prefer a portfolio with plenty of bonds - perhaps even the ten year gilt (mixed with IL Gilts and equities), which would benefit from "roll-down" for five years, at which point you could revisit the question of what to be invested in. You can look at the "yield curve" here
http://markets.ft.com/research/Markets/Bonds

kidmugsy

You could also consider defensive investment trusts e.g. Personal Assets Trust http://www.patplc.co.uk
or Ruffer, discussed here:
http://boards.fool.co.uk/ruffer-where-were-at-12880717.aspx?sort=whole

You should read the Personal Assets Trusts reports - they make quite an education.

jamesd

Ribin wrote: »

Age 58 next April, Married, Income requirement now circa £20k. Additional pensions - Final Salary Pension of circa £10k p.a in 2019 time RPI linked, my state pension in 2022 and Wife's in 2026. Not too concerned at leaving money for the kids as they are major beneficiaries under a family trust set up by my Dad

OK. You should be thinking in terms of £40,000 to £45,000 of income for the rest of your life, initially from pension pot income and capital, then the work and state pensions plus pension pot income, maybe some capital drawing and the ISA and VCT I mention below. If you truly have no use for the extra £5,000 now it's more cautious to spend at £40,000. This really needs a bit more modelling but it's reasonable enough for planning given the lack of requirement to preserve capital. It takes monitoring and adjusting as required but that's easy enough.

If things like travel interest you, you'll probably be better off in lifestyle overall by starting at £50,000 for ten years and dropping back to £35,000 to £40,000 later, so you get the higher income level when you're most able to enjoy it. Just be sure that you're comfortable with the idea of dropping back later. This trading current and future income for lifestyle is a personal choice for you to make - just pick what you're comfortable with, since it seems clear that you have more than ample income to be far above your minimum target level.

A proper plan will also need to consider your personal life expectancy to work out how long the capital has to last for the longest credible lifespan. I tend to use around age 110 in planning since that's pretty cautious for likely life expectancies even for those in good health. If you're diabetic, overweight, a heavy drinker or smoker or have other things that would restrict your life expectancy you could use less than that and take a higher income than 110 would permit.

Once your state pension starts it'll add £144 a week or about £7500 a year unless you already have more than that accrued. Check your state pension statement to find out. Add the £10,000 final salary to the state pension and you're just £2,500 short of being able to use Flexible Drawdown instead of Capped Drawdown once these are all in payment. Buying a level annuity that pays £2,500 would qualify you and would be a good idea. Flexible Drawdown effectively bans future pension contributions because of the penalties for making them but lets you draw an unlimited amount from the pension pot. Other than the 25% tax free lump sum it's taxed as income in the year in which it's taken. This is per person, your wife can't use your income to qualify, she'd have to qualify in her own right.

Given that your potential income may take you into the higher rate tax band you might also consider whether some limited use of VCT investing would be appropriate, because these pay income tax free. No more than about 5% of your investable assets, though. 30% income tax relief in the year in which you pay in, capped at the amount of income tax actually paid in that year, has to be repaid if you sell within five years.

You should probably take the maximum pension income permitted by GAD, though perhaps not enough to get you into higher rate income tax - the VCT investing can help to keep you out of that. The part not used for spending can be reinvested within a S&S ISA to provide ongoing tax free income.

IFAs will differ in just how they go about things but this is the sort of general approach you should expect for your situation if you use one. I'm not an IFA.

And forget the Metlife product. Not remotely close to what you need and far more expensive than the sorts of options that have been described here as a way to get what you're after.

Ribin

Thanks for all your replies

The lifestyle Jamesd has outlined here is perfect for me

jamesd wrote: »

If things like travel interest you, you'll probably be better off in lifestyle overall by starting at £50,000 for ten years and dropping back to £35,000 to £40,000 later, so you get the higher income level when you're most able to enjoy it. Just be sure that you're comfortable with the idea of dropping back later. This trading current and future income for lifestyle is a personal choice for you to make - just pick what you're comfortable with, since it seems clear that you have more than ample income to be far above your minimum target level.

And whilst I am not adverse to a bit of risk, I am concerned that with the stock market at current levels it is too risky to pile into equities as highlighted by Kid Mugsy

kidmugsy wrote: »

If you really do want to "maximise income" then the thing to avoid is a 100% investment in equities, which might collapse just before a three-year GAD calculation. Also, if you want the investment to last (on average) less than ten years, equities may be a bit risky.You might even consider crystallising in three goes, so that there is one new GAD calculation every year, giving you some protection from market slumps.

What I do not have is the financial acumen of you guys/girls, so I would prefer to put my money into a scheme that only requires me to make fairly basic decisions and not switching money here there and everywhere.

I don't really understand crystallisation (will be researching this afternoon). Is it possible to put all your tax free cash with the same company that will control the remainder of the pension, so that I can draw an element of both?

dunstonh

And whilst I am not adverse to a bit of risk, I am concerned that with the stock market at current levels it is too risky to pile into equities as highlighted by Kid Mugsy

Predicting the future is difficult at any time. This is no different. The stockmarket is actually a long way for peaks if you look at earnings. That doesnt mean those peaks are going to be seen again for some time or ever but it does suggest that we are not overheated compared to past positions.

In a cautious multi-asset portfolio you would likely have under 50% in equity anyway and if you had good income distribution then that would go some way to off set your concerns.

Sometimes what is best financially is not the best thing to do. You have to do what is most comfortable for you. Now some would argue that the metlife product actually fits the comfort side of your head. Others would argue that a bit of knowledge, understanding and an acceptance of sensible risk is better. There are many ways to address this. No solution will be perfect. Or rather the best solution is unknown at this time and only time will tell what was best and you can bet. You can only make a judgement call now.

Ribin

Thanks Dunston


I accept that no solution will ever be perfect and whilst the Metlife solution does give a lot of comfort that comes at a significant cost.


I think I am going to take a closer look at the MGM flexible annuity plan as it gives me the option to switch in and out, has a good mix of portfolios to choose from and should my health deteriorate I can opt for an enhanced annuity.


Are there any others you can recommend I look at with similar schemes?

Ribin

I have decided to go the MGM Flexible annuity route ( I know capped drawdown would probably be more beneficial but don't want to manage the investments myself). MGM Figs are max income £24.5k min £10.2k with 1.1% annual fee.

My question is - to achieve an income of £20k p.a. would I be better off setting my withdrawals from the plan at the minimum and top up from my tax free cash of £145k, thus mitigating tax and allowing the plan a better opportunity to grow OR should I just take out the MAX cash each year, to get as much cash out as quickly as possible and invest any surplus alongside the TFC?

Any thoughts?

kidmugsy

Ribin wrote: »

MGM Figs are max income £24.5k min £10.2k … to achieve an income of £20k p.a. would I be better off setting my withdrawals from the plan at the minimum and top up from my tax free cash of £145k, thus mitigating tax and allowing the plan a better opportunity to grow OR should I just take out the MAX cash each year, to get as much cash out as quickly as possible and invest any surplus alongside the TFC?

Since other pensions set in later, I'd be tempted to go for the MAX.

Ribin wrote: »

I … don't want to manage the investments myself.

Yup, but you do have to manage your tax-free lump sum. In your shoes I would aim to fill ISAs for yourself and wife every year, investing then in (say) a five or six or seven year gilt that you'd expect to keep until it's two years old, then (perhaps) sell and repeat. I might also stick a lump into Personal Assets Trust via its Investment Scheme, and exploit the present loopy circumstance that interest-bearing current accounts are the best savings accounts you can get. Umpteen threads hereabouts recommend Santander 123 (paying 3% p.a. on £20k, apparently) and the vantage accounts (you can each have three, it would seem) at Lloyds (3%p.a. on balances of £3k-£5k). You can also do the vantage trick at Halifax and BoS. Exploit the madness while it persists.

In your shoes, if I had access to a bank's safety deposit I might put some money into gold sovereigns as insurance against God-knows-what, and lock them away. No income tax on them, obviously, and no CGT either.