Drawdown cashflow calculation

Parking_Trouble

Transferring the wife's DB pension into a SIPP.
IFA has done a recommendation report, recommending a transfer.

It is not an easy document to read and doesn't provide a simple illustration of the impact of growth, charges, drawdown and inflation. The information is there but takes a lot of effort to decipher.

I wanted to check how it compares with her DB pension and whether the SIPP will provide the same, or hopefully better income and last long enough.

The reason for the lack of clarity I am told is down to the FCA and how they insist the figures are presented. It seems crazy. I appreciate the need for conservative forecasts but the number don't seem to align with reality. Are the FCA deliberately making it more difficult than it needs to be?

Are there any calculators out there that allow me to play with the growth, drawdown, inflation, charges?

I have created my own but would like to test it against something professionally built. It's only a guide to see how the variables might affect the numbers but it seems to be a much better predictor than the official documents.

sandsy

The regulator says IFAs should be doing exactly what you are asking to see - a comparison of what the DB scheme might provide and what the SIPP might provide. They don!!!8217;t say how it has to be laid out. The only constraints are on the assumptions used for growth but most TVAS reports will show low, middle and high growth anyway. And the high rate isn!!!8217;t conservative at all.

You should go back to the IFA and ask them about these things - they should have that information and should have explained all of the stuff you!!!8217;re asking about.

atush

Why did he recommend the transfer? Does she have a medical condition andcwont make old bones?

She has a spouse to inherit the spousal pension.

Generally speaking, if you are of normal good health and a med or lower risk profile it is pretty hard to beat a indexed income for life

dunstonh

It is not an easy document to read and doesn't provide a simple illustration of the impact of growth, charges, drawdown and inflation. The information is there but takes a lot of effort to decipher.

The suitability report is more of a compliance document. The content is driven by the regulator and the FOS. So, it reads that way for that reason.

Many IFAs have secondary reports to cover other things and they will often have the charting etc.

The reason for the lack of clarity I am told is down to the FCA and how they insist the figures are presented. It seems crazy. I appreciate the need for conservative forecasts but the number don't seem to align with reality. Are the FCA deliberately making it more difficult than it needs to be?

The current projection rates are very low and many consider them to be lower than is likely. However, in the past, they were high. So, we have moved from a position of overstate and under deliver to understate and over deliver. However, the FCA could be totally right on this and those returns may end up being realistic.

Also, do not forget that the FCA figures include a deduction of 2.5% p.a. for inflation. That is sensible when used in the right context.

Are there any calculators out there that allow me to play with the growth, drawdown, inflation, charges?

The IFA will have tools to adjust those figures. Whilst they cant do that on the suitability report, they can adjust and show you using examples.

coyrls

Parking_Trouble wrote: »

I wanted to check how it compares with her DB pension and whether the SIPP will provide the same, or hopefully better income and last long enough.

The income provided by and the longevity of the SIPP will always be an estimate based on assumptions, if you want more certainty, she will have to stay in the DB scheme.

Parking_Trouble

atush wrote: »

Why did he recommend the transfer? Does she have a medical condition andcwont make old bones?

She has a spouse to inherit the spousal pension.

Generally speaking, if you are of normal good health and a med or lower risk profile it is pretty hard to beat a indexed income for life

Barring accidents and arguments she'll almost certainly outlive me.
She has no life threatening medical conditions.
She is 55 and wants some money now because she is fed up with me saving and she has a low paid job.
She probably won't draw anymore before 60 and will probably keep below the personal tax allowance and take her tax free 25% each year. State pension at 67 will probably reduce the drawdown requirement, maybe defer taking SP for a year?
She wants to be able to leave something for the kids.
I'm going to take my main DB pension in May this year and carry on working for year. I can cover all the living costs, plus I'll probably transfer a couple of smaller DB pension to a low cost SIPP

Parking_Trouble

dunstonh wrote: »

The suitability report is more of a compliance document. The content is driven by the regulator and the FOS. So, it reads that way for that reason.

Many IFAs have secondary reports to cover other things and they will often have the charting etc.



The current projection rates are very low and many consider them to be lower than is likely. However, in the past, they were high. So, we have moved from a position of overstate and under deliver to understate and over deliver. However, the FCA could be totally right on this and those returns may end up being realistic.

Also, do not forget that the FCA figures include a deduction of 2.5% p.a. for inflation. That is sensible when used in the right context.



The IFA will have tools to adjust those figures. Whilst they cant do that on the suitability report, they can adjust and show you using examples.

Thanks DunstonH. That aligns to what I have been told from a couple of sources.

I have created my own modeller so I can see the potential impact of the variables - Growth rates, inflation, drawdown needs, etc

AnotherJoe

Check out firesim and firecalc. These allow you to see what your investments could return based on all previous periods of stockmarket performance. And you can set targets, eg "set a rate of withdrawal based on not running out until age 90 in 95% of all previous stock market periods", for example.

atush

She is 55 and wants some money now because she is fed up with me saving

Or you could loosen the pruse strings lol

Parking_Trouble

atush wrote: »

Or you could loosen the pruse strings lol

Going to break open the piggy bank and have a spend up from May until I stop work :j

Parking_Trouble

AnotherJoe wrote: »

Check out firesim and firecalc. These allow you to see what your investments could return based on all previous periods of stockmarket performance. And you can set targets, eg "set a rate of withdrawal based on not running out until age 90 in 95% of all previous stock market periods", for example.

Cheers Joe I'll check them out.