Pension drawdown question

fuzzy9999

Hi all, just retired , woohoo, looking to access one of my pensions  with Aegon , I have asked them about drawdown and they have come back with two options that seem very similar. A drawdown product , and a UFPLS . Can someone explain the benefits or pitfalls of these products ? And which one is the best option. 
I have £80000 in the fund and plan to live off that for the next 41/2 years , I am 62 next April, until my State pension kicks in , I also have another pension with Royal London , that has £97000 in at the moment, that I plan to use to top up my state pension. 
I also have approx £25000 in savings , for that rainy day.
If any more information is required , please ask.
Thank you

dunstonh

 A drawdown product , and a UFPLS . 

It probably means your existing Aegon pension doesn't support drawdown but does support UFPLS.   If you want drawdown, you would need to move to a new pension.

Can someone explain the benefits or pitfalls of these products ? And which one is the best option. 

The best option is the one that suits your objectives and needs.   There is also phased drawdown.  And flexibility means you can take a level income of gap filling income or whatever income is needed.

I have £80000 in the fund and plan to live off that for the next 41/2 years , I am 62 next April, until my State pension kicks in , I also have another pension with Royal London , that has £97000 in at the moment, that I plan to use to top up my state pension. 

 So, basically, you are looking to fund the gap until state pension age and then take any residue as a monthly income for life thereafter?

How much do you need each year whilst you are funding that gap?

fuzzy9999

Hi Dunstonh , thanks for the reply. I have just checked with Aegon on the charges , no charge to withdraw on UFPLS , and they do a Drawdown product, I would have to transfer the lump sum to that one , no transfer charge then £75 a year after that. 
I am looking at taking approx 12000 to 15000 a year form the fund to cover the gap. Which I can live on comfortably, I also have my rainy day savings as a back up. 

dunstonh

If you need to move the pension from a legacy plan to a modern plan then it may well be in your interests to consider the wider marketplace and not stick with the existing provider.  It may be worthwhile investigating whether the pensions should be combined.  Whilst RL support drawdown on their modern pension plan they didnt on most of their older ones.   So, maybe this is an exercise at looking at both.   You should have your income plan laid out, not just now and until state pension age but also beyond.  Anything extra you take now is money you cannot take later.   So, you need to make sure all phases of your retirement years will have enough.

For funding the gap you could use phased UFPLS or phased drawdown.  You could also just use the 25% under drawdown but that be unlikely to be the best option.   Phased UFPLS is drawing a lump sum on an ad-hoc basis to cover you for a period.  So, if you needed £15,000 a year, then you draw £15,000 under UFPLS.   25% of that is tax-free.  75% is taxable but your personal allowance will be used and with no other income until state pension, you would have the whole amount to use up.    You could take the optimal figure to make the 75% match the personal allowance to avoid tax altogether.   Phased drawdown is basically the same as UFPLS but set up on a more regular basis. i.e. monthly income with each payment paid as 25% tax free/75% taxable.       Do note that there is some confusion in terminology as some refer to different methods in different ways and some terminology can apply to different methods.  Phased drawdown, for example, can be the term used to cover any phasing of your withdrawals using a number of methods.  Some providers will refer to the drawdown options not using generic names but their own words.  Such as "income release".  

xylophone

Have you obtained a state pension forecast? See https://www.gov.uk/check-state-pension

https://www.pensionwise.gov.uk/en
might be a start.

You could consult an IFA for an overall view/advice on retirement funding.
https://adviserbook.co.uk/
You would tick "confirmed independent" and such other options as required.

Albermarle

You can book a free interview/consultation with Pensionwise . They can not offer you personalised advice but they can explain about drawdown etc .
https://www.pensionwise.gov.uk/en
Also here is an explanation from another pensions provider 
https://www.fidelity.co.uk/retirement/your-retirement-options/#2177673

fuzzy9999

You have all been very helpful, I have a State pension forecast. 
Many thanks

BritishInvestor

xylophone said:

Have you obtained a state pension forecast? See https://www.gov.uk/check-state-pension

https://www.pensionwise.gov.uk/en
might be a start.

You could consult an IFA for an overall view/advice on retirement funding.
https://adviserbook.co.uk/
You would tick "confirmed independent" and such other options as required.

Can I ask if you're an IFA? It's rare that I see Adviserbook mentioned and it would be great to see it get a higher profile.