Moving Private Pension to a Drawdown

segovia

atush wrote: »

Knowing in advance, some of the investments you would choose will help re charges.

I'll be doing my research, but cash and low risk seem a likely option.

atush

Oh dear, sounds like shortfall and inflation risk

dunstonh

segovia wrote: »

I'll be doing my research, but cash and low risk seem a likely option.

That is the sort of thing that was concerning the FCA. In their eyes, too many DIY investors are poorly investing and going too heavy in cash in particular.

This replaces investment risk with shortfall risk and inflation risk.

bostonerimus

segovia wrote: »

I/we have other sources of income from property rentals and a DB scheme of my Wife's assuming that we don't decide to transfer it. We also have significant equity in our home which is already far too big for us.

I don't like losing money and I don't like giving it away either. The decision I have to make is,do I give an IFA £6,000.00 or do it myself ?

Many people want an IFA to hold their hand in drawdown. It's a psychological crutch, but whether the maybe 1% they'll spend on fees is worth it is a complicated question as it's composed of an infinite number of "what ifs" that involve portfolio design and management decisions. But anyone with a modicum of common sense can grasp the basics of asset allocation and drawdown strategies and definitely save themselves 1%...which is actually a quarter of the income you might be able to sensibly withdraw each year. Being sensible is the key here and that requires a balance of risk/return and your need for income. If your income needs are low then you might be ok with a low risk cash biased portfolio, or you could also say you can afford to take a lot of risk as you weather substantial losses. The most difficult situation for a retiree is the one where they are trying to get as much as possible from their pot and the balancing of risk/return/longevity and probability of various outcomes. If you are uncomfortable making those choices then an IFA might be useful.

As you have DB pensions and rent to give you an income floor you have already shown some good financial sense and planning. I say that because that's my situation too ;-) I live of rent and my DB pension and my drawdown pension pot just sits there and grows. I've been retired for five years and haven't taken anything out from it yet. I would advise you to keep things relatively simple; my pot is invested in a few large index tracker funds. Don't go for spectacular returns and don't worry about down turns as you have the rent and DB pensions. I haven't done anything with my drawdown pot in five years other than check on the balance every so often. I've even stopped rebalancing as part of my plan.

So I think you are in a good situation to DIY , to set up a self sustaining financial plan and to save yourself a lot of money in fees.

segovia

bostonerimus wrote: »

Many people want an IFA to hold their hand in drawdown. It's a psychological crutch, but whether the maybe 1% they'll spend on fees is worth it is a complicated question as it's composed of an infinite number of "what ifs" that involve portfolio design and management decisions. But anyone with a modicum of common sense can grasp the basics of asset allocation and drawdown strategies and definitely save themselves 1%...which is actually a quarter of the income you might be able to sensibly withdraw each year.

As you have DB pensions and rent to give you an income floor you have already shown some good financial sense and planning. I say that because that's my situation too ;-) I live of rent and my DB pension and my drawdown pension pot just sits there and grows. I've been retired for five years and haven't taken anything out from it yet. I would advise you to keep things relatively simple; my pot is invested in a few large index tracker funds. Don't go for spectacular returns and don't worry about down turns as you have the rent and DB pensions. I haven't done anything with my drawdown pot in five years other than check on the balance every so often. I've even stopped rebalancing as part of my plan.

So I think you are in a good situation to DIY , to set up a self sustaining financial plan and to save yourself a lot of money in fees.

Thanks, the DB is my wife's so unless she has other plans what is mine his hers and vice-versa. I think I am looking at it in a similar way, the DB is guaranteed £9,000.00 a year and index-linked, all the property we own is paid for so all rents are income. And if we need a lump sum for anything. which is unlikely we can sell. I see my two pension pots as a bonus, I don't want massive returns with high risk, steady rate of interest/profit would suffice. J

dunstonh

I don't want massive returns with high risk, steady rate of interest/profit would suffice. J

Risk is not on/off. it is a sliding scale.

If you are talking about interest and using drawdown then capital loss is likely.

Taking too low risk can be as damaging as taking too high a risk. Its about taking a sensible risk for the objectives.

segovia

dunstonh wrote: »

Risk is not on/off. it is a sliding scale.

If you are talking about interest and using drawdown then capital loss is likely.

Taking too low risk can be as damaging as taking too high a risk. Its about taking a sensible risk for the objectives.

Thanks, I think drawdown is a long way off yet as we don't need it. My focus would be to get comfortable with managing the pot after its transferred and familiarising myself with the platform and options and assessing the risk of any decisions that I am likely to take as a result of my research. Finding middle ground if that is possible.

bostonerimus

segovia wrote: »

Thanks, the DB is my wife's so unless she has other plans what is mine his hers and vice-versa. I think I am looking at it in a similar way, the DB is guaranteed £9,000.00 a year and index-linked, all the property we own is paid for so all rents are income. And if we need a lump sum for anything. which is unlikely we can sell. I see my two pension pots as a bonus, I don't want massive returns with high risk, steady rate of interest/profit would suffice. J

You need to understand just how much income you need from drawdown to come up with an appropriate asset allocation and plan. So do a budget and include all your outgoings and all your income sources; DB pensions, rent and state pensions. Then you can decide how you'll cover the shortfall; you could economize; do some part time work or use drawdown and the amount you need from drawdown can be used to guide your investment choices. You also might want to leave some money to your heir and that can factor into your choices as well. Also if you are still working and looking to grow your pot your investments could be different from when you are in drawdown and looking to generate income.

TBC15

segovia wrote: »

It was an IFA that was recommended via our company accountants and they are independent. We engaged with another a few years ago, I can't even remember their name to check. The same type of fees, £7000.00 to transfer my main pension to another provider. The value of the transfer was only about 120K at the time.

I paid £1500 on £174000 about 18 months ago, from what I have seen and been quoted this is not typical.

segovia

TBC15 wrote: »

I paid £1500 on £174000 about 18 months ago, from what I have seen and been quoted this is not typical.

That sounds reasonable, what did you transfer it to?