level of sustainable income?

[Deleted User]

jamesd wrote: »

Cash is just part of the bond percentage that you can draw your income from, at east according to Guyton. If you run out off cash you just move on to the bonds.

Depends on the type of bond. Short term government bonds - sure.

NeilC1965

The other piece of info that I should have mentioned is the db pension at 55 is £14.4k versus a CETV of £639k.
The remaining £291k is in dc and AVC funds

MK62

NeilC1965 wrote: »

The other piece of info that I should have mentioned is the db pension at 55 is £14.4k versus a CETV of £639k.
The remaining £291k is in dc and AVC funds

That would probably make it worth at least considering a transfer, although as you would have to take advice before you could do it, I'd see what the IFA (ie independent FA) said first, after he/she has conducted the in depth DB pension review.

As to how much income you could sustainably generate from a £930k pot (with SP waiting at 67), there are several unknowable unknowns, so it's impossible to be definitive - welcome to the world of DC pension drawdown - but given "average" assumptions for those unknowns, a reasonable starting figure would be iro of £30-34k pa. You just need to accept the need for regular plan reviews and be prepared to alter course, if necessary.

DairyQueen

Without wishing to put a damper on an interesting discussion re: SWR, the OP may/may not be aware that he would be facing an uphill battle to transfer.

The cost of receiving the necessary advice will be steep assuming that he can locate an IFA technical specialist willing to take on the case. So far, there is no indication that he will meet sufficient of the criteria required to receive a positive recommendation. Some platforms won't accept DB transfers at all, and very few would accept a non-recommended transfer two years ago. I suspect that even fewer will do so now.

I transferred from a DB with a positive recommendation two years ago. I am an exception for the following reasons:

- Reduced life expectancy.
- No financial dependents.
- Married but OH has good pension arrangements and requires no income protection from me.
- OH and I have sufficient other guaranteed income (DB and SPs) to cover all basic expenses.
- Not risk averse.
- Far from expert, but have experience managing a reasonable sized portfolio.
- OH is competent to take over the investment management should I pop my clogs before him (likely).
- Some of my DB income had little/zero inflation protection (GMP applies).
- Generous CETV (x 32).

These are the kind of criteria required to receive a positive recommendation.

For most people it is a very bad idea to transfer from a DB pension. Thus the difficulty in doing so.

Malthusian

Prism wrote: »

I don't fully agree with that. People might not want to but having worked through two stock market crashes in my lifetime and seeing effect it had on my wage (made redundant after dot.com and had little free lance work during the financial crisis), it is at least for some of us entirely normal to have to deal with reduced income and cancelled luxuries during those times.

We are talking about retirement. Tightening your belt in working life, when you haven't got a large pile of savings to live off during lean years and reducing expenditure may be a necessity, is completely different from having to do it in decumulation when you have accumulated a very large pile of money to live off for the rest of your life. In the former case it is a necessity, in the latter it should not be; it is self-inflicted by poor planning and not holding enough cash as a buffer.

Note that stopping income from a fund invested in the stockmarket and taking the same income from cash instead is not a pay cut.

If you would prefer to be almost 100% in the stockmarket and cut your income during crashes to improve capital growth (thanks to reduced cash drag), then that is a valid choice, but it is also you working for your money rather than the other way around.

jamesd wrote: »

The evidence shows that retired people normally take pay cuts entirely voluntarily as they get older, with the unspent money being saved. The more income they have, the bigger the cuts tend to be (bullet point second from bottom).

Reducing expenditure due to decreasing activity and mobility is not the same as reducing expenditure because the stockmarket has crashed and you didn't keep enough in cash to breeze it out.

DairyQueen wrote: »

Some platforms won't accept DB transfers at all, and very few would accept a non-recommended transfer two years ago. I suspect that even fewer will do so now.

As far as I'm aware the number of platforms that will accept insistent clients is still the same, i.e. 1.

There may be other platforms that accept insistent clients I haven't heard of, but I've yet to see one named.

DT2001

What income do you need to do what you’d like to do?

How flexible can you be and how much risk are you willing to take.

I’ve read quite a few threads on here and it has changed my outlook. I had just been building pots of funds in various wrappers but now look at expenditure as the key. I have a basic level which I’ll cover from SPA by small DB’s and SP and the rest of our income will be down to how investments perform. I intend to hold some ‘cash’ to assist smoothing but like the idea of being ‘rewarded’ with an extra holiday etc if investments have done well.

Understanding yourself is the key. Everyone on here has their own ideas and you can adopt those that you are comfortable with and develop a plan for you.

Thrugelmir

Deleted_User wrote: »

Depends on the type of bond. Short term government bonds - sure.

Then you'll be performing under the current level of inflation. Resulting in the equity part of the portfolio having to do far more heavy lifting to compensate.

jamesd

Malthusian wrote: »

Reducing expenditure due to decreasing activity and mobility is not the same as reducing expenditure because the stockmarket has crashed and you didn't keep enough in cash to breeze it out.

There's still no need to reduce income if a safe withdrawal rate is being used. If 100% equities is chosen then the calculated safe withdrawal rate allows for selling to provide income.

Malthusian wrote: »

As far as I'm aware the number of platforms that will accept insistent clients is still the same, i.e. 1.

There may be other platforms that accept insistent clients I haven't heard of, but I've yet to see one named.

On 1 May 2015 the FT story "Fears over 'new dawn' for final salary pension transfers" gave some lists. For convenience, here's a list of providers from that who'll take over £30k against advice: Aegon, Aviva, AJ Bell, Canada Life (case by case decision), Dentons (case by case decision), Friends Life. Of those only AJ Bell and Canada Life will accept transfers of up to £30,000 without advice.

It's been a while since 2015 so there will have been some changes.

jamesd

NeilC1965 wrote: »

The other piece of info that I should have mentioned is the db pension at 55 is £14.4k versus a CETV of £639k.

At a 44 times income multiple that's around the top end of what's available today and the DB income is just 2.25% of the capital. Safely initially taking over twice the DB income - 32k - with the Guyton-Klinger rules seems OK assuming at least 50% equities and some income flexibility, or a lot if you're willing to cut this to as low as the £14.4k, a 55% cut.

Malthusian

jamesd wrote: »

There's still no need to reduce income if a safe withdrawal rate is being used. If 100% equities is chosen then the calculated safe withdrawal rate allows for selling to provide income.

I agree it's perfectly possible, though personally I would find greater piece of mind in drawing down from cash during a crash, at the cost of lower overall growth due to cash drag, rather than drawing a lower rate of income from a 100% equities portfolio that can survive pound cost ravaging.

The tricky thing about safe withdrawal rates is that it stops being a safe withdrawal rate during a crash - albeit hopefully temporarily - as the fall in the fund value increases the withdrawal %.

A while ago I posted a worked example of how a safe withdrawal rate can stop being a safe withdrawal rate (albeit this was using the 4% rule, average multi-asset performance, a deliberately cherry-picked worst possible starting point and no Guyton-Klinger cleverness).

On 1 May 2015 the FT story "Fears over 'new dawn' for final salary pension transfers" gave some lists. For convenience, here's a list of providers from that who'll take over £30k against advice: Aegon, Aviva, AJ Bell, Canada Life (case by case decision), Dentons (case by case decision), Friends Life. Of those only AJ Bell and Canada Life will accept transfers of up to £30,000 without advice.

It's been a while since 2015 so there will have been some changes.

I think that list is well out of date. But someone looking at an insistent transfer should by all means ring up and check. I would be very surprised if Aegon and Aviva take insistent transfers. Friends Life is now Aviva. A quick Google of Dentons' website suggests they now require a positive recommendation, although I am basing this on a form I have found where the adviser has to confirm that the recommendation was positive, so that is not definitive.