LTA Query - company financial advisor

jamesd

Mick70 wrote: »

jamesd , are you suggesting in your opinion that its a no brainer to take the valuation and have the £1.4m in a DC pot instead of the DB pension ?
as say if i use a spreadsheet from age 50 - 80 (30 years) the DB of £25.5k p.a rising with inflation each year (say 2%) , over 30 year comes back to £1.2m , but gives security of no crashes

It's never a no-brainer but the offer is excellent and I'd go for it.

Safe withdrawal rates include both crashes and times of high inflation that could devastate an interest only plan.

Not using investments effectively guarantees a worse outcome than the many crashes that can be expected over your planning time, because of the lower expected growth. The way you deal with the effectively certain crashes is by using:

1. a mixture of investments, ideally at least 50% equities unless temporarily reduced by Guyton's rule.
2. enough cash savings so that combined with expected income you could live for years. Even a ear in cash plus expected dividends and bond interest is likely to last five or more years (depends on investments and income, could need more). Count it as part of your bond percentage and have enough so you're happy knowing that market blips don't affect your day to day spending.
3. rules like Guyton-Klinger that just need an hour or two once a year so you aren't paying too much attention to market movements.
4. more guaranteed income like from state pension deferral.
5. knowledge and understanding of what they do and that they are routine and you're well prepared for them.

If that's what it takes for you to use investments, keep five years of spending in cash savings.