Pension portfolio drawdown and protection

Bluebell_53

Having saved in to our pensions since we were 16 we now 40 years on have a very significant sum to invest. We have decided that we do not want an annuity and we have been recommended to put the sum in to a platform, which will allow us to monitor performance, risk etc and draw sums as required.
However I am worried that being way above the £85k that is protected is it a good idea to have a so much money with one provider? Does it even count as one provider?
We do intend to retain some existing savings in cash / share ISAs etc for emergency use but want to get better returns from the majority of it. Should we be looking at spreading it in other ways?
Am I just panicking at having such a large sum to invest? If £85k rule does apply we would need around 7 distinct providers....

zagfles

Been discussed here loads. Eg see here https://forums.moneysavingexpert.com/discussion/5706255

dunstonh

However I am worried that being way above the £85k that is protected is it a good idea to have a so much money with one provider?

There is no £85k protection on investments. You either have 100% FSCS protection with no upper limit if you used insured funds or £50k if you use unit trust/OEICs. (and no FSCS protection if you use shares, ITs, ETFs or other unregulated investments).

Am I just panicking at having such a large sum to invest?

What is large in your eyes?

We have decided that we do not want an annuity

Just picking up on that comment. They way you worded it suggested it was a choice between similar options.
However, Annuity vs drawdown is more about fitting a certain goal. The pension freedom options didnt just improve drawdown. it also improved annuity options. I'm not suggesting annuity is right for you but just making sure you eliminated it for the right reasons. A lot of people eliminate them for the wrong reasons or out-of-date reasons. Plus, for many people with larger pots, a combination of annuity and drawdown is quite popular.

IanSt

Bluebell_53 wrote: »

Having saved in to our pensions since we were 16 we now 40 years on have a very significant sum to invest. We have decided that we do not want an annuity and we have been recommended to put the sum in to a platform, which will allow us to monitor performance, risk etc and draw sums as required.

I take it that you have transferred out of a defined benefit scheme and that this recommendation has come from an IFA?

Am I just panicking at having such a large sum to invest? If £85k rule does apply we would need around 7 distinct providers....

Currently there is a £50k limit for certain investments, but that only covers for certain very low risk circumstances e.g. fraud at the fund house. It wouldn't cover you for poor performance e.g. you would not be covered if your fund drops 50% because of poor stock choice or just because the wider market has fallen.

Both of you get your own protection, so you may feel that diverting your funds across a few platforms/funds each will give you a bit of additional security without adding a big increase in hassle of having to look after lots of security usernames and passwords. But I know many people here have just the one platform and a few funds and are happy.

jamesd

The first thing to know is that unlike deposit protection, investment FSCS protection doesn't cover normal ups and downs. If you had some of the money in a bond fund that dropped by 10% you have no FSCS protection because that's just what investments do. Same if it was an emerging markets equity fund that dropped by 70%. You're expected to manage those risks by selecting an appropriate mixture of investments.

The relevant investment protection is usually £50,000 per firm and the main things it covers are insolvency or fraud. The investments are normally held in trust and not vulnerable to insolvency of the pension or investment firm, but some amounts might be in transit and protected by the FSCS instead of trust law. Trusts protect an unlimited amount of money from the insolvency risk. Fraud can take money out of the trust and here the FSCS role could be important.

Some pension firms offer insured funds. They would normally have the pension firm name in front of the investment firm name, so Standard Life Invesco Perpetual somefund would probably be the somefund managed by Invesco Perpetual in an insured wrapping by Standard Life. Not always this way. As usual no investment performance protection but unlimited protection for the fraud and insolvency issues.

As usual the limits are per firm so if you had two funds managed by IP both would count towards that firm's limit. Funds by Allianz or othwr firms would have their own limit.

You may also find that Drawdown: safe withdrawal rates is worth reading.

westv

dunstonh wrote: »

The pension freedom options didnt just improve drawdown. it also improved annuity options.

How where the options improved?

dunstonh

westv wrote: »

How where the options improved?

Annuity death benefits were restricted in law before (remember the old 0,5 or 10 year guarantee). Now there are no restrictions on death benefits. You can now get 30 year guarantees or return of unpaid fund value for example.

One of the old reasons (pre 2015) for not using annuity was low quality death benefits. That is no longer the case.

Thrugelmir

Bluebell_53 wrote: »

Having saved in to our pensions since we were 16 we now 40 years on have a very significant sum to invest.

You've being saving in cash for 40 years (within a pensions wrapper) ????

sandsy

The £85k doesn’t apply here - there’s different protections for investments. Presumably your pension drawdown will be in a type of SIPP on the platform? In which case each investment within the SIPP needs to be looked at separately - as indicated above, funds will normally be protected up to £50k each.

Haven’t you beenmaging this money up until now? Did it come from a DB Pension? If protecting the funds is so important to you, why didn’t you stick with the DB pension? Are you comfortable with the idea of investing in funds which will go up and down in value, sometimes substantially?

xylophone

Having saved in to our pensions since we were 16 we now 40 years on have a very significant sum to invest

You have each had a DC pension since you were 16?

You are both now aged 56 and want to access your pension and have each decided against purchasing an annuity?

Your current provider(s) does not facilitate drawdown so that you need to move to one that does?

Have you each considered taking the advice of an Independent Financial Adviser?

https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser

https://directory.moneyadviceservice.org.uk/en