Advice for large pension pot

Cus

stranex said:

I am 45 years old and in a very fortunate position of having a pot worth c. £1.65M. I’m by no means frugal but believe I can live very comfortably on around £3.5k per month. Given my current pot would provide around that sum already, I’m inclined to be adventurous over the next 12 years (plan to retire at 57) and try to get to a figure that will allow me to make a substantial purchase upon retirement and still have c. £2m to provide income in retirement. 

Would I be far out of line to “anticipate” growth of c.8% pa. in an adventurous portfolio? Like I say, I can afford to take a higher level of risk over the next 12 years in the assumption (?) I can protect what I need for income and buy whatever I can afford with whatever growth I make. 

I fully appreciate I have to take account if inflation and, more importantly, 55% tax on whatever I have above the LTA but my view (?) is that I’d rather have 45% of something than 100% of nothing? 

My ultimate dream would be to purchase a motorboat upon retirement but rather than aim for a figure, I’m thinking go adventurous and see where I’m at in 12 years time? 

Am I right to think that whatever I have above my requirements for income, I can take as a lump sum (minus the 55% tax) and do with as I please? Obviously a boat in not a great long term investment but I want to enjoy my trappings! And it’ll still be worth “something” in future so able to either sell if I need more income or pass on as inheritance (appreciating the IHT issues!)

Does this sound like a sensible plan? Anyone see any potential pitfalls? 

 It makes no sense to me to try to avoid more 55% tax by being overly defensive, however you don't want to risk what is your main retirement income either.

You might want to 'ring fence' the part of the portfolio that you must not lose into highly secure investments, and separately have your 'play' part of the sipp that is much higher risk knowing that you could lose a lot of it, but could also give you that 100ft yacht 😁

Brenster

Firstly well done and congratulations on securing your financial future at such a young age.
If you look at many of the comments on this forum, most people aim to retire early enough to allow them time to enjoy their retirement whilst they are young and healthy, obviously the later the retirement unfortunately the less of a guarantee our health is.
If i was lucky enough to be in your position, i would not put my money into anything more than a moderate risk (for me this would be a mixture of medium risk pension, isas and possibly some buy to let properties).  I would also try and enjoy myself with my family, more holidays, memories etc, as before long they will fly the nest.  I would also consider setting up a tax efficient trust fund where your money can be drip fed in to your childrens name year by year in a tax efficient way to avoid, a future sizeable inheritance tax (i am sure you dont want the government to get their greedy mits on your lifes legacy).  I understand this can be done by transfering equity in your home if you didnt want it to be in cash.
Again, well done, congratulations, and enjoy your future, you have earned it !

arnoldy

Nice job to get where you are - well done.
8% is certainly plausible - the total return of the FTSE250 over a number of years has been 11.1%.
Be carful of charges and feeding the suits - with a portfolio that large you can (as a minimum) have a good portfolio of FTSE250, Small cap, Fledgling and AIM shares. Aim for 0.04% platform costs (£180/yr) plus the odd (less than £100/yr) dealing charge/stamp duty/spread all in - so 0.06% on say £0.5m of directly held equities.

barnstar2077

In your situation I would plough everything into savings for the next five years and then retire at 50 (or at the point when the numbers add up.) 

Being blunt, you could drop down dead at 63 (or live to 103 of course.)  I would rather have an extra seven or so years with my family than a bigger boat.

[Deleted User]

You had to hire a financial adviser to get out of your DB pension, stranex. 
Is he/she not advising you now?

chelseablue

I wish I had this kind of dilemma  

stranex

ZingPowZing said:

You had to hire a financial adviser to get out of your DB pension, stranex. 
Is he/she not advising you now?

I did, I have and they are. Problem being I’m paying them a sizeable fee which I’m pretty sure I don’t need to be. They’ve done well this year but most of the investments we’ve made together rather than them advising. I’m keen to take some control myself 

stranex

barnstar2077 said:

In your situation I would plough everything into savings for the next five years and then retire at 50 (or at the point when the numbers add up.) 

Being blunt, you could drop down dead at 63 (or live to 103 of course.)  I would rather have an extra seven or so years with my family than a bigger boat.

I’m very much in agreement. Love life now! I had cancer in my 20s so that all too real for me. I’m fortunate to have a job that gives me lots of time off and, being divorced, get to spend quality time with my young daughters and my partner and her kids 

I am saving into a SS ISA with a view to use that to live off till I can drawn down at 57 but obviously have to wait for the numbers to work. 50 would be amazing but realistically I think it’ll have to be 54/55. Soon as the numbers work though I’m out of there!

stranex

Brenster said:

Firstly well done and congratulations on securing your financial future at such a young age.
If you look at many of the comments on this forum, most people aim to retire early enough to allow them time to enjoy their retirement whilst they are young and healthy, obviously the later the retirement unfortunately the less of a guarantee our health is.
If i was lucky enough to be in your position, i would not put my money into anything more than a moderate risk (for me this would be a mixture of medium risk pension, isas and possibly some buy to let properties).  I would also try and enjoy myself with my family, more holidays, memories etc, as before long they will fly the nest.  I would also consider setting up a tax efficient trust fund where your money can be drip fed in to your childrens name year by year in a tax efficient way to avoid, a future sizeable inheritance tax (i am sure you dont want the government to get their greedy mits on your lifes legacy).  I understand this can be done by transfering equity in your home if you didnt want it to be in cash.
Again, well done, congratulations, and enjoy your future, you have earned it !

Thank you!
Hadn’t considered the trust fund, will definitely look into that and that’s very important to me.
It’s all a balance isn’t it and none of us have a crystal ball (unfortunately!) You’re correct in spending as much time as possible with kids, family, friends etc but I can’t access my funds till 57 so need an income prior to that. Part time at some point might be the way to go until the SS ISA is of an amount to “bridge the gap” 

stranex

Cus said:

stranex said:

I am 45 years old and in a very fortunate position of having a pot worth c. £1.65M. I’m by no means frugal but believe I can live very comfortably on around £3.5k per month. Given my current pot would provide around that sum already, I’m inclined to be adventurous over the next 12 years (plan to retire at 57) and try to get to a figure that will allow me to make a substantial purchase upon retirement and still have c. £2m to provide income in retirement. 

Would I be far out of line to “anticipate” growth of c.8% pa. in an adventurous portfolio? Like I say, I can afford to take a higher level of risk over the next 12 years in the assumption (?) I can protect what I need for income and buy whatever I can afford with whatever growth I make. 

I fully appreciate I have to take account if inflation and, more importantly, 55% tax on whatever I have above the LTA but my view (?) is that I’d rather have 45% of something than 100% of nothing? 

My ultimate dream would be to purchase a motorboat upon retirement but rather than aim for a figure, I’m thinking go adventurous and see where I’m at in 12 years time? 

Am I right to think that whatever I have above my requirements for income, I can take as a lump sum (minus the 55% tax) and do with as I please? Obviously a boat in not a great long term investment but I want to enjoy my trappings! And it’ll still be worth “something” in future so able to either sell if I need more income or pass on as inheritance (appreciating the IHT issues!)

Does this sound like a sensible plan? Anyone see any potential pitfalls? 

 It makes no sense to me to try to avoid more 55% tax by being overly defensive, however you don't want to risk what is your main retirement income either.

You might want to 'ring fence' the part of the portfolio that you must not lose into highly secure investments, and separately have your 'play' part of the sipp that is much higher risk knowing that you could lose a lot of it, but could also give you that 100ft yacht 😁

Thank you. Yes, that’s my intention once I’ve taken control myself, to put the amount I need for income into a lower risk portfolio and let the remainder “ride” in an adventurous portfolio which will either give me a rowing boat or a sunseeker 😁