Investing in Drawdown

SeniorSam

Retiring before you reach state pension age may also reduce the state pension unless you have paid sufficient into the scheme.

Retiring at approximately age 55 will require a large pension pot or a modest income need, but without answering the questions about the size of the pot and your needs may not get you the help that you are looking for.

jamesd

coyrls wrote: »

If you really can't accept any falls you are pretty much retricted to savings options or an annuity.

An annuity doesn't really deliver no falls. Instead it takes the whole drop at the time you purchase it, by locking you into a much lower level of income than you can get from drawdown or drawdown then state pension later.

This eventually changes once health gets bad or you reach age 75-85 sort of range, when annuities start to pay out more than standard investments can pay. At which point buying them can easily become a good deal..

jamesd

Aged wrote: »

Hm, I'm beginning to wonder if drawdown is the right vehicle for me :undecided

Try to remember that the people who are replying to you have often been studying this for many years. Don't rush it. In particular, don't think it's too hard and blow something like half or your potential income on annuity just because it seems easiest!

Just take your time and continue learning. P2P is one of the best things to learn about because of the excellent income potential and low risk level available from some of them that do secured lending with protection funds on top. You may find that just a quarter of your pot in such investments can generate all of your desired income - say just the tax free lump sum portion.

dunstonh

I am generally risk averse, so (as you say) equities do not sit well with me. At the outset, all I am aiming to achieve is to withdraw a small amount of supplementary income (say 4-5K in the first year) and leave the rest invested so that it grows in value and is not exposed to risk. I am particularly keen that the value of my investment does not fall.

Are you sure drawdown is suitable for you? without equities, you will almost certainly be putting your fund at shortfall risk and inflation risk. It is unlikely to meet your income requirements unless they happen to be very very low.

The annuity option has already been considered and ruled out (at this point in time at least).

Why? Given your risk profile, you should consider them.

zagfles

dunstonh wrote: »

Are you sure drawdown is suitable for you? without equities, you will almost certainly be putting your fund at shortfall risk and inflation risk. It is unlikely to meet your income requirements unless they happen to be very very low.



Why? Given your risk profile, you should consider them.

Indexed linked annuities, to avoid the inflation risk.

Aged

jamesd wrote: »

... don't think it's too hard and blow something like half or your potential income on annuity just because it seems easiest!

There is no chance of that!

... P2P is one of the best things to learn about because of the excellent income potential and low risk level available from some of them that do secured lending with protection funds on top. You may find that just a quarter of your pot in such investments can generate all of your desired income - say just the tax free lump sum portion.

Can you invest in P2P within a drawdown account? Btw, the whole of my investment is tax free as it is an inherited pension.

coyrls

If you're considering P2P, you should go into it with your eyes open; it is not a risk free option.

Aged

coyrls wrote: »

If you're considering P2P, you should go into it with your eyes open; it is not a risk free option.

No I don't think so. Sounds a bit more like gambling than investing to me.

Aged

dunstonh wrote: »

Are you sure drawdown is suitable for you? without equities, you will almost certainly be putting your fund at shortfall risk and inflation risk. It is unlikely to meet your income requirements unless they happen to be very very low.

No, I'm not sure at all that drawdown is right for me, as I've said above. It's what has been recommended as best for me. Hence why I'm trying to find out how it all works in practice.

Why? Given your risk profile, you should consider them.

The annuity quotes I have been given have not tempted me to hand over a whole lot of cash for not really a lot of income. Perhaps it makes sense for older pensioners, but it's not for me.

zagfles

Aged wrote: »

No, I'm not sure at all that drawdown is right for me, as I've said above. It's what has been recommended as best for me. Hence why I'm trying to find out how it all works in practice.

The annuity quotes I have been given have not tempted me to hand over a whole lot of cash for not really a lot of income. Perhaps it makes sense for older pensioners, but it's not for me.

Other than indexed linked annuities, everything is a risk. Even a level annuity had inflation risk - who's to say a future govt won't start printing money and we'll get runaway inflation? Even current levels of inflation would reduce the value of your income significantly over a few decades.

Read the links in jamesd's posts, I think perhaps you should reassess your attitude to risk?