How to spread £200k over 10 years?

Triumph13

coyrls wrote: »

Remember to take the full 25% tax free out of your DC pension for pot 2, with the tax free interest allowance plus your personal allowance, you will get some/all of the interest tax free on your tax free lump sum and there is no tax on the capital.

I'll be taking my full 25% out in 2021, but that's more through worries about growth breaching the LTA if I leave it inside and use UFPLS. I also want to move as much as possible of 'Pot 1' out of the pension and into ISAs without attracting HRT over the period before all the pensions kick in so there will be a need for some serious juggling of ISA allowances, tax free interest allowances and the new dividend income allowance. You can see why I'm having to steel myself to start doing the cashflow modelling, particularly with the rules changing every budget. I need to get thinking about it soon as one option is to 'buy' a bit of extra ISA capacity by using my mortgage facility to fill up our annual ISA allowances in cash for a year or two before retirement, at the cost of a very small interest rate differential. All spare income is currently being poured into the pensions at the moment and so the ISA allowances are otherwise unused.
Of course that may all change if Osborne turns the pension system upside down in the autumn statement!

gterr

Triumph13 wrote: »

I'm happy to have a lot of volatility in income from it as we should have plenty of slack so my current thinking is on the lines of withdrawing of 4% of actual portfolio value each year, subject to indexed floor and ceiling of 3% and 5% of starting value respectively. I'll couple this with a modest cash buffer, partly to smooth income, but more as a way of avoiding taking even the floor income for a year or two in a major crash.

I'm really interested to read this, since it is almost precisely this formula I plan to use to determine a 'safe' withdrawal rate when it comes time to drawdown from our investments to subsidise our meagre DB pensions. Anyone agree, or plan to use variations on this formula?

jamesd

Triumph13 wrote: »

The second pot I need (for my peace of mind) to be very low risk (say no more than 10% downside) as that is to cover core spending and I am really struggling to come up with an investment strategy for it.

None of the lending-based secured peer to peer places that I'd personally use have an expected net capital loss as high as even zero over the sort of timeframe you're considering.

The primary risk of substantial loss from this form of investment is fraud at the platform level, not the investments, assuming you diversify reasonably within a platform. To counter that risk you should ensure that you use a range of different platforms so that your exposure to each is not going to exceed your tolerance for loss if 100% fraud loss happens at one of them. It's not unduly hard to pick say five platforms paying typically 8-15% on the loans that they make and the combination of this level of income and the diversification would keep you below your maximum loss target over the time period involved provided you had only one 100% loss due to platform fraud. You can also mix in some of the lower paying ones that will pay 5% or so at lower overall risk level due to their size. Doing that you should be able to get to ten platforms and a single platform100% fraud loss of no more than 10% even ignoring the interest from the others.

Note that the reason this fraud loss risk exists is because the Financial Services Compensation Scheme does not cover P2P, not even to the £50,000 level for other investments.

The Peer to Peer Independent Forum is probably the best place to go to learn about the range of P2P place available.

There's also the almost 100% secured Albion Venture Capital Trust that anticipates paying 10% tax free dividends a year split into two pieces, with 30% of the purchase price refunded by HMRC, capped at your income tax payable in the tax year of purchase. The relief has to be repaid if sold within five years. It's next expected to be open again for new purchases late this year, perhaps as early as November. In effect it's secured P2P but with a bigger tax break and greater restriction.