transfering into drawdown, How does it work?

Mindovermatter_2

Hello, I wondered if anyone can shed any light onto how a transfer into a SIP drawdown from a company pension would work?

Most people go into a "life-styling" option in their company pension as they get close to retirement, however I understand that this is traditionally for people that are looking at taking up an annuity.

What happens if you we're planning to stay invested heavily in equities during 35+ years of retirement via drawdown?

Would you simply not do the life styling option? And stay with your chossen allocation, but then how would the transfer work, I assume you would still have to "sell" your units in your pension, only then have to buy new fund units in your new drawdown SIPP?

Sorry if this is stupid question!

Regards

zagfles

Yes I think the "lifestyling" option usually assumes you're going to buy an annuity, so if you're going to remain in equities you may want to opt out of this - I have with mine. They may be able to do the transfer in stock, you'd have to ask your company scheme and SIPP provider

gadgetmind

It's not a stupid question. Far from it.

Yes, if intending to use drawdown for 35+ years, you need a portfolio than can weather this, which means you'll need a decent slug of equities.

Read "Smarter Investing" by Tim Hale before you attempt this. You could skip to the tables showing risk of depleting pot given various portfolios, but I suggest you invest the time to understand the principles.

As for mechanics of transfer, this depends on the company scheme. What kind of scheme is it and what are you invested in?

Mindovermatter_2

It's a defined contribution company scheme where I can select from several funds, I looked at my allocation and I'm currently 23% in Emerging markets, 51% in global equity (40/60) and 26% in a Diversified growth fund. However I have stopped adding to the diversified one and now I adding 80% to global and 20% to emerging.

I guess I'm just trying to get my head round allocations and what happens come retirement, if I have to sell my units to transfer into drawdown then ultimately it doesn't matter what they were in vested in at that time as they will be transferred as monetary value to then buy new funds for retirement. Is this correct?

I've downloaded the ibook, so I'll have read!

gadgetmind

if I have to sell my units to transfer into drawdown then ultimately it doesn't matter what they were in vested in at that time as they will be transferred as monetary value to then buy new funds for retirement. Is this correct?

Your asset allocation will be important up until drawdown (and beyond) but you're right that a move to drawdown will probably be in cash. Many large pension providers don't provide drawdown, but some do. Worth checking.

I've downloaded the ibook, so I'll have read!

I've struggled with electronic versions of books with loads of graphs and charts, and Smarter Investing has many of these. Please let me know how you get on.

Mindovermatter_2

I've struggled with electronic versions of books with loads of graphs and charts, and Smarter Investing has many of these. Please let me know how you get on.[/QUOTE]

Yes I know what you mean, I use an ipad which I find pretty good as you alter fonts sizes etc. I'll get reading!

gadgetmind

iPad should be OK; Kindle is rubbish for any graphs and charts.