Pension Cashflow Retirement Planner - Key Info?

GSP

BritishInvestor said:

NottinghamKnight said:

Varying the amounts withdrawn is an inherent part of drawdown, also drawdown would typically be combined with fairly large cash allocations of several per cent which would flex as investment returns vary; the other thing to remember is that even if you maintain a 4% drawdown this won't be the same from year to year, as the pot size varies so will the amount being withdrawn vary if it is a fixed percentage. 

"Varying the amounts withdrawn is an inherent part of drawdown"
It depends what approach you have chosen to take. Some prefer a withdrawal rate that increases with inflation each year and is unaffected by market performance (within agreed parameters)

"also drawdown would typically be combined with fairly large cash allocations of several per cent which would flex as investment returns vary"
Large cash allocations can have a detrimental impact on the sustainability of the plan, so you'd need to be aware of this.

" the other thing to remember is that even if you maintain a 4% drawdown this won't be the same from year to year"
The % drawdown figure tends to be based on the starting withdrawal amount and balance if you have gone for an approach as detailed above (withdrawals increasing with inflation each year)

I suppose another thing to consider, and in some posts above that apparently we start to spend less from 65, though again surely that also depends on a number of circumstances.

BritishInvestor

GSP said:

NottinghamKnight said:

Varying the amounts withdrawn is an inherent part of drawdown, also drawdown would typically be combined with fairly large cash allocations of several per cent which would flex as investment returns vary; the other thing to remember is that even if you maintain a 4% drawdown this won't be the same from year to year, as the pot size varies so will the amount being withdrawn vary if it is a fixed percentage. 

That’s true NK with a 4% withdrawal being a different amount and the idea is that the pot depletes this will mean less money. That’s when you hope state pension kicks in and helps out somewhat. The secret or goal is trying to gauge how to get through ‘to the end’, whenever that is!

What happens during a period such as the 1970s when you have a period of high inflation with falling markets?

GSP

BritishInvestor said:

GSP said:

NottinghamKnight said:

Varying the amounts withdrawn is an inherent part of drawdown, also drawdown would typically be combined with fairly large cash allocations of several per cent which would flex as investment returns vary; the other thing to remember is that even if you maintain a 4% drawdown this won't be the same from year to year, as the pot size varies so will the amount being withdrawn vary if it is a fixed percentage. 

That’s true NK with a 4% withdrawal being a different amount and the idea is that the pot depletes this will mean less money. That’s when you hope state pension kicks in and helps out somewhat. The secret or goal is trying to gauge how to get through ‘to the end’, whenever that is!

What happens during a period such as the 1970s when you have a period of high inflation with falling markets?

Thanks BI. Ha, the killer statement! Stepping a bit further what if there is a world war, have you made provisions for that, no food, no money, no house maybe, nothing.

What if, what if, what if, that’s the thing, everyone has various states of cautiousness and risk. I hope, hope as maybe plenty of others that the world is a different place than it was otherwise there will be millions in the food queue. But, yes definitely there will be plenty of events creating volatility. I am still looking at information, looking at numbers from spreadsheets and creating them, trying to come to a sensible judgement and an understanding of what to do going forward. I am looking to ‘enjoy’ the ‘good times’ and not have to worry in this world for once (seems all we do to live is worry about everything), and look after ourselves when things turn sour, which they will do on a number of occasions.
Just going into retirement having had more money going out than I have earned for the past 30 years, I am hoping to worry less. In truth, juggling finances has been a big part of my life to survive this far. 

Having this £750k to ‘deal with’ plus my wife’s current £175k in less than 2 years, I am hoping to find that balance and know when to adjust. It’s another huge learning curve and journey we are on, but another of life’s challenges, and something to worry about. Nothing to live for otherwise!

BritishInvestor

GSP said:

BritishInvestor said:

GSP said:

NottinghamKnight said:

Varying the amounts withdrawn is an inherent part of drawdown, also drawdown would typically be combined with fairly large cash allocations of several per cent which would flex as investment returns vary; the other thing to remember is that even if you maintain a 4% drawdown this won't be the same from year to year, as the pot size varies so will the amount being withdrawn vary if it is a fixed percentage. 

That’s true NK with a 4% withdrawal being a different amount and the idea is that the pot depletes this will mean less money. That’s when you hope state pension kicks in and helps out somewhat. The secret or goal is trying to gauge how to get through ‘to the end’, whenever that is!

What happens during a period such as the 1970s when you have a period of high inflation with falling markets?

Thanks BI. Ha, the killer statement! Stepping a bit further what if there is a world war, have you made provisions for that, no food, no money, no house maybe, nothing.

What if, what if, what if, that’s the thing, everyone has various states of cautiousness and risk. I hope, hope as maybe plenty of others that the world is a different place than it was otherwise there will be millions in the food queue. But, yes definitely there will be plenty of events creating volatility. I am still looking at information, looking at numbers from spreadsheets and creating them, trying to come to a sensible judgement and an understanding of what to do going forward. I am looking to ‘enjoy’ the ‘good times’ and not have to worry in this world for once (seems all we do to live is worry about everything), and look after ourselves when things turn sour, which they will do on a number of occasions.
Just going into retirement having had more money going out than I have earned for the past 30 years, I am hoping to worry less. In truth, juggling finances has been a big part of my life to survive this far. 

Having this £750k to ‘deal with’ plus my wife’s current £175k in less than 2 years, I am hoping to find that balance and know when to adjust. It’s another huge learning curve and journey we are on, but another of life’s challenges, and something to worry about. Nothing to live for otherwise!

You can certainly make provisions for what has happened in the two world wars and I'm more than happy to go through an example. Of course there's always the chance that the future could be worse, but as you say, money might then not be your #1 priority

jamesd

NottinghamKnight said:

even if you maintain a 4% drawdown this won't be the same from year to year, as the pot size varies so will the amount being withdrawn vary if it is a fixed percentage. 

If using the normal meaning of "4% rule" it means taking 4% of the initial capital value and increasing that with inflation every year regardless of what markets do, more formally called "constant inflation-adjusted income". In almost all cases this leaves the person dying with more money than they started with. People who don't live through near worst case times should recalculate what is safe, perhaps every five years.

Other rules, like Guyton-Klinger, do a better job of delivering higher income at the younger ages when people are more likely to use it.

garmeg

jamesd said:

NottinghamKnight said:

even if you maintain a 4% drawdown this won't be the same from year to year, as the pot size varies so will the amount being withdrawn vary if it is a fixed percentage. 

If using the normal meaning of "4% rule" it means taking 4% of the initial capital value and increasing that with inflation every year regardless of what markets do, more formally called "constant inflation-adjusted income". In almost all cases this leaves the person dying with more money than they started with. People who don't live through near worst case times should recalculate what is safe, perhaps every five years.

Other rules, like Guyton-Klinger, do a better job of delivering higher income at the younger ages when people are more likely to use it.

Would you use 4% of the then fund in the recalculation to rebase going forward?

Or perhaps a higher percentage given that you are 5 years older at that point - perhaps 4.5% at the first review then 5% at the second with larger increases as you age?

Thrugelmir

GSP said:

BritishInvestor said:

GSP said:

This is interesting yet eye opening looking at certain data.
I was interested in how my wife and my funds have grown since we started just over 3 years ago. Our holdings are identical and as she is yet to drawdown, its a clean run of data with just fees excluded.
It really is interesting at the point in time you calculate growth from, such different results.
2019 data is not there but according to Moneyfacts data, average pension growth fund for 2018 (which I assume is end Dec 97 to end Dec 98) was -6.2%. This stacks up well with numbers from my wife’s fund of -5.9%.
When you compare growth at the point we were invested to year end, the results are quite different.
With fees included

Year on Year Growth Aug 17-18  3.8%.
YoY 18 -5.9%.
The big driver in this appears to a dip in Dec 18 (anyone know what that was), but while the Aug on Aug balance was c£5k higher, Dec on Dec was down c£10k.
My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?

Here is the rest of the Moneyfacts data. Is this more about catching things right.

Calendar year	% pension fund growth
2018	-6.2%
2017	10.5%
2016	15.7%
2015	2.6%
2014	5.8%
2013	13.9%
2012	10.8%
2011	-4.6%
2010	13.8%
2009	22.3%
2008	-19.7%

"My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?"

I'm not sure that yearly fund growth should be used to plan with. Typically in a cashflow model, prudent assumptions are used based on long-run returns of asset classes (~100 years). So the first step for you is to understand what reasonable assumptions to use - this can be done by working out your asset allocation and doing some research (the Credit Suisse returns yearbook is useful).
The next step is to stress test this using historical data to evaluate worst case historical outcomes. 

I know in the absence of anything else, but how can people use anything like this to project.
What I was also trying to bring in is how volatile funds are. To me, it seems timing is crucial. You can withdraw when growth is good, but put up the shutters when growth is negative (£ ravaging).

Markets aren't the real economy. Over the longer term they will however revert to the mean.  While the global economy chugs along at a fairly low rate of growth , or is going to be the case in 2020 one of contraction. Markets will swing between highs of optimism and lows of pessimism depending on the mood of the "herd".  Investors like nothing more than reaffirmation of their viewpoint. 

Time4T_Accounts

Thrugelmir said:

GSP said:

BritishInvestor said:

GSP said:

This is interesting yet eye opening looking at certain data.
I was interested in how my wife and my funds have grown since we started just over 3 years ago. Our holdings are identical and as she is yet to drawdown, its a clean run of data with just fees excluded.
It really is interesting at the point in time you calculate growth from, such different results.
2019 data is not there but according to Moneyfacts data, average pension growth fund for 2018 (which I assume is end Dec 97 to end Dec 98) was -6.2%. This stacks up well with numbers from my wife’s fund of -5.9%.
When you compare growth at the point we were invested to year end, the results are quite different.
With fees included

Year on Year Growth Aug 17-18  3.8%.
YoY 18 -5.9%.
The big driver in this appears to a dip in Dec 18 (anyone know what that was), but while the Aug on Aug balance was c£5k higher, Dec on Dec was down c£10k.
My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?

Here is the rest of the Moneyfacts data. Is this more about catching things right.

Calendar year	% pension fund growth
2018	-6.2%
2017	10.5%
2016	15.7%
2015	2.6%
2014	5.8%
2013	13.9%
2012	10.8%
2011	-4.6%
2010	13.8%
2009	22.3%
2008	-19.7%

"My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?"

I'm not sure that yearly fund growth should be used to plan with. Typically in a cashflow model, prudent assumptions are used based on long-run returns of asset classes (~100 years). So the first step for you is to understand what reasonable assumptions to use - this can be done by working out your asset allocation and doing some research (the Credit Suisse returns yearbook is useful).
The next step is to stress test this using historical data to evaluate worst case historical outcomes. 

I know in the absence of anything else, but how can people use anything like this to project.
What I was also trying to bring in is how volatile funds are. To me, it seems timing is crucial. You can withdraw when growth is good, but put up the shutters when growth is negative (£ ravaging).

Markets aren't the real economy. Over the longer term they will however revert to the mean.  While the global economy chugs along at a fairly low rate of growth , or is going to be the case in 2020 one of contraction. Markets will swing between highs of optimism and lows of pessimism depending on the mood of the "herd".  Investors like nothing more than reaffirmation of their viewpoint. 

And I guess that this is why we should try and hold a couple of years’ cash, so that we can ride out those swings.  And try and spot the calmer times within them, short though they might be, to make withdrawals when we need to (such as to use up a year’s personal allowance).

GSP

Thrugelmir said:

GSP said:

BritishInvestor said:

GSP said:

This is interesting yet eye opening looking at certain data.
I was interested in how my wife and my funds have grown since we started just over 3 years ago. Our holdings are identical and as she is yet to drawdown, its a clean run of data with just fees excluded.
It really is interesting at the point in time you calculate growth from, such different results.
2019 data is not there but according to Moneyfacts data, average pension growth fund for 2018 (which I assume is end Dec 97 to end Dec 98) was -6.2%. This stacks up well with numbers from my wife’s fund of -5.9%.
When you compare growth at the point we were invested to year end, the results are quite different.
With fees included

Year on Year Growth Aug 17-18  3.8%.
YoY 18 -5.9%.
The big driver in this appears to a dip in Dec 18 (anyone know what that was), but while the Aug on Aug balance was c£5k higher, Dec on Dec was down c£10k.
My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?

Here is the rest of the Moneyfacts data. Is this more about catching things right.

Calendar year	% pension fund growth
2018	-6.2%
2017	10.5%
2016	15.7%
2015	2.6%
2014	5.8%
2013	13.9%
2012	10.8%
2011	-4.6%
2010	13.8%
2009	22.3%
2008	-19.7%

"My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?"

I'm not sure that yearly fund growth should be used to plan with. Typically in a cashflow model, prudent assumptions are used based on long-run returns of asset classes (~100 years). So the first step for you is to understand what reasonable assumptions to use - this can be done by working out your asset allocation and doing some research (the Credit Suisse returns yearbook is useful).
The next step is to stress test this using historical data to evaluate worst case historical outcomes. 

I know in the absence of anything else, but how can people use anything like this to project.
What I was also trying to bring in is how volatile funds are. To me, it seems timing is crucial. You can withdraw when growth is good, but put up the shutters when growth is negative (£ ravaging).

Markets aren't the real economy. Over the longer term they will however revert to the mean.  While the global economy chugs along at a fairly low rate of growth , or is going to be the case in 2020 one of contraction. Markets will swing between highs of optimism and lows of pessimism depending on the mood of the "herd".  Investors like nothing more than reaffirmation of their viewpoint. 

Exactly. Is it a case of catching the right moment to withdraw?
I’ll post these Moneyfacts average pension growth numbers again. I am not sure how these are calculated however if someone knows?
2008  -19.7%.

2009  22.3%.
2010  13.8%.
2011  -4.6%.
2012  10.8%.
2013  13.9%.
2014  5.8%.
2015  2.6%.
2016  15.7%.
2017  10.5%.
2018  -6.2%.
2019  14.4%.
An awful lot of volatility year to year. With such volatility, makes you wonder if a 3 year moving average on top provides a smoother view.
3 years average to 2010  5.5%   (2008, 2009, 2010 divided by 3).
2011  10.5%    (2009, 2010, 2011 divided by 3).
2012  6.7%.
2013  6.7%.
2014  10.2%.
2015  7.4%.
2016 8.0%.
2017  9.6%.
2018  6.7%.
2019  6.2%.

These look smoother and take out much of the volatility and you would say look more ‘sensible’ and better to work with. Perhaps planners should be looked at in years of 3, rather than 1 year in isolation?
With charges added back in and no withdrawals my wife’s pension is a clean run of data. From when the fund started in August 3 years ago, the fund has grown each year by 3.8%, 4.9% and 4.2%. Even in this data however, such is the volatility, end Dec numbers are -5.9%, +16.7% and +7.2%?

Thrugelmir

GSP said:

Thrugelmir said:

GSP said:

BritishInvestor said:

GSP said:

This is interesting yet eye opening looking at certain data.
I was interested in how my wife and my funds have grown since we started just over 3 years ago. Our holdings are identical and as she is yet to drawdown, its a clean run of data with just fees excluded.
It really is interesting at the point in time you calculate growth from, such different results.
2019 data is not there but according to Moneyfacts data, average pension growth fund for 2018 (which I assume is end Dec 97 to end Dec 98) was -6.2%. This stacks up well with numbers from my wife’s fund of -5.9%.
When you compare growth at the point we were invested to year end, the results are quite different.
With fees included

Year on Year Growth Aug 17-18  3.8%.
YoY 18 -5.9%.
The big driver in this appears to a dip in Dec 18 (anyone know what that was), but while the Aug on Aug balance was c£5k higher, Dec on Dec was down c£10k.
My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?

Here is the rest of the Moneyfacts data. Is this more about catching things right.

Calendar year	% pension fund growth
2018	-6.2%
2017	10.5%
2016	15.7%
2015	2.6%
2014	5.8%
2013	13.9%
2012	10.8%
2011	-4.6%
2010	13.8%
2009	22.3%
2008	-19.7%

"My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?"

I'm not sure that yearly fund growth should be used to plan with. Typically in a cashflow model, prudent assumptions are used based on long-run returns of asset classes (~100 years). So the first step for you is to understand what reasonable assumptions to use - this can be done by working out your asset allocation and doing some research (the Credit Suisse returns yearbook is useful).
The next step is to stress test this using historical data to evaluate worst case historical outcomes. 

I know in the absence of anything else, but how can people use anything like this to project.
What I was also trying to bring in is how volatile funds are. To me, it seems timing is crucial. You can withdraw when growth is good, but put up the shutters when growth is negative (£ ravaging).

Markets aren't the real economy. Over the longer term they will however revert to the mean.  While the global economy chugs along at a fairly low rate of growth , or is going to be the case in 2020 one of contraction. Markets will swing between highs of optimism and lows of pessimism depending on the mood of the "herd".  Investors like nothing more than reaffirmation of their viewpoint. 

Exactly. Is it a case of catching the right moment to withdraw?
I’ll post these Moneyfacts average pension growth numbers again. I am not sure how these are calculated however if someone knows?
2008  -19.7%.

2009  22.3%.
2010  13.8%.
2011  -4.6%.
2012  10.8%.
2013  13.9%.
2014  5.8%.
2015  2.6%.
2016  15.7%.
2017  10.5%.
2018  -6.2%.
2019  14.4%.
An awful lot of volatility year to year. With such volatility, makes you wonder if a 3 year moving average on top provides a smoother view.
3 years average to 2010  5.5%   (2008, 2009, 2010 divided by 3).
2011  10.5%    (2009, 2010, 2011 divided by 3).
2012  6.7%.
2013  6.7%.
2014  10.2%.
2015  7.4%.
2016 8.0%.
2017  9.6%.
2018  6.7%.
2019  6.2%.

These look smoother and take out much of the volatility and you would say look more ‘sensible’ and better to work with. Perhaps planners should be looked at in years of 3, rather than 1 year in isolation?
With charges added back in and no withdrawals my wife’s pension is a clean run of data. From when the fund started in August 3 years ago, the fund has grown each year by 3.8%, 4.9% and 4.2%. Even in this data however, such is the volatility, end Dec numbers are -5.9%, +16.7% and +7.2%?

Not unsurprisingly the source is a subscription service. 

https://www.moneyfactsgroup.co.uk/publications/treasury/pensions