Investing in Drawdown

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SAHD_Jim wrote: »

Seems a bit of wanting to have your cake and eat it too.

You want no risk but you want to take income and for the rest to grow. An annuity is not attractive but neither are cash rates.

Yes I do. And, since I only need to take a small amount from it (for the first few years at least) I would have thought it is reasonable to expect that the rest will grow, is it not?

Pretty much anything that is going to provide a decent return above cash is going to be exposed to some risk, whether it is equities, ETFs, P2P, Corporate Bonds, Property etc.

I can see that now yes. So, putting your examples here in order of risk (starting with the least) let me see - property, corporate bonds, ETFs then P2P. How did I do?

What has your pre-drawdown pension been invested in? In other words what got you to this position, surely you have taken some risk in the past?

As I have said elsewhere in the thread, I inherited the pension pot.

coyrls

Aged wrote: »

I can see that now yes. So, putting your examples here in order of risk (starting with the least) let me see - property, corporate bonds, ETFs then P2P. How did I do?

Unfortunatley it's not as simple as that, within each of those types of investment there are higher risk and lower risk options. So the answer (as it often is) is "it depends". Generally the sequence would go, Gilts then Investment grade corporate bonds before the rest. I wouldn't feel confident putting the rest in risk order without some qualifications (in both senses of the word!).

jem16

Aged wrote: »

As I have said elsewhere in the thread, I inherited the pension pot.

Have you other pensions and if so what?

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jem16 wrote: »

What is your adviser advising?

You've been asked but not answered yet but it might help if the answers were known?

1. What size is the pot?

2. What annuity quotes have you got?

3. How much would you want to drawdown each year?

You really have to decide if you're going to be comfortable with a drawdown strategy. There's no point in going down that route if you're going to worry each night about how your investments are performing, whether your pot is growing or more importantly falling and whether you'll have enough money to last your lifetime.

For many the annuity route will still be the best because they can just forget about it and take the income. I wouldn't totally discount it if it gives you peace of mind.

Jem, we haven't got as far as discussing that yet, hence why I'm trying to get an appreciation of how it all works for myself. It's a large pot, in excess of £400K. For the first year I only want to draw something like 4-5K to supplement my other income.

coyrls

If you want to look at something at the low end of the risk range, take a look at this: http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=F6FN1&univ=E you will see on the performance chart that even something rated with a Risk Score of 9, sometimes dips in value and over the last 12 months it has returned 2% but only 2.5% over 3 years (that's not a per annum figure). It's unlikely that something this safe would be competitive with an annuity (that can at least use longer dated gilts).

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coyrls wrote: »

If you want to look at something at the low end of the risk range, take a look at this: http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=F6FN1&univ=E you will see on the performance chart that even something rated with a Risk Score of 9, sometimes dips in value and over the last 12 months it has returned 2% but only 2.5% over 3 years (that's not a per annum figure). It's unlikely that something this safe would be competitive with an annuity (that can at least use longer dated gilts).

OK so looking at that, my immediate thoughts are that with the fund management charge of 0.2% on top of the other ongoing charges re running and managing the drawdown account, it's not going to bring in much of an income and the value of the investment would be lucky to even keep pace with inflation.

coyrls

Aged wrote: »

OK so looking at that, my immediate thoughts are that with the fund management charge of 0.2% on top of the other ongoing charges re running and managing the drawdown account, it's not going to bring in much of an income and the value of the investment would be lucky to even keep pace with inflation.

And that is why you must be prepared to take more risk if you want higher returns. If you really don't want to take any risk then an annuity will probably be your best option.

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coyrls wrote: »

And that is why you must be prepared to take more risk if you want higher returns. If you really don't want to take any risk then an annuity will probably be your best option.

A good point, and well made. Thanks

maximumgardener

maybe a mix & match approach can work for you with £400k + in a sipp. ?
thats a decent starting point for sure.

use some cash......you decide what cash you need to hand . id say £50k

buy an annuity or maybe 2 ? stagger them buy one to give you your £5K INCOME TOP UP you wish.
thats £100k- £150k depending on range of factors.
then poss buy another say 5 years later.

invest the rest in a range of funds to give a diverse mix. expect it to go up and down . remember
investing should be considered a long game. 10 year min more like 30, in reality......!!!
Overall returns indicate you should be ok with (reasonable) 99% certainty with a withdrawal rate of 4 to 5%.....thats the drawdown bit. if you don't want that buy another annuity

your advisors (IFA) should already have indicated these options to you??

good luck!!

maximumgardener

also "fill your boots" with S&S ISA's ?

good luck