Drawdown Pensions - your experiences during 2020 and intentions in 2021?

dunstonh

@dunstonh - we know you are an IFA - what experiences were your clients during 2020, & how do you guide their expectations for 2021?

For the vast majority in drawdown, I operate the 18-24 months cash, use income units with the yield going into cash (within the pension). That gives another 6-12 months draw potential.     In the early part of the year, we didn't sell units to top up the cash but the later part of the year we did sell units as the recovery had occurred.  Nobody had their draw rate adjusted or their income turned off.    
Expectations for 2021 are that markets will be as unknown as they always are.    You prepare for the worst but hope for the best.  There is no point attempting to guess what will come next as nobody knows.   If you are prepared for most events then there is usually little that you need to do that is unexpected or unusual when those events occur.  

Thrugelmir

cfw1994 said:

dunstonh said:

BritishInvestor said:

cfw1994 said:

shinytop said:

cfw1994 said:

Is it just me, or has the intent of this thread disappeared in the bickering 
Anyone else got any *cough* actual experiences of drawdown pensions during 2020, and intentions in 2021?
Feels like there needs to be a separate and deeply technical thread for some posters.....

It happens to a lot of threads.  The OP askes how to wire a plug and before we know it people who have never wired a plug before are arguing about advanced electromagnetic theory. 

Seems to be precisely what has happened here.  I come back a few hours and 3 pages later and still no useful additions in the interim.......Where’s that “unsubscribe” button 

I'm not really sure what more you were expecting from the thread. There were several comments from people on here that have wired a plug, from electricians that wire plugs for a living, and from electricians that write books on how to wire plugs.
Many expressed surprise that the RCD had tripped given the mild spike in current and wonder why the power hadn't been restored sooner.

I think that is a fair assessment. 

We can eliminate all the posts talking about whether RL is a good option or not.  It is a simple option and does the job as well or better than all the other simple options out there.    It won't be best.  it won't be worst.  It will be like the rest of the simple options in being middle of the road.
The focus should really be on why there didn't appear to be the preparation for a negative period (maybe the was as the OP said they knew it could happen but didn't expect it so soon), the lack of any emergency fund outside of the pension (maybe there was and this was part of the plan to fall back on during negative periods)  and why such an extreme option of turning off the income altogether took place (again, maybe that was the plan if there were sufficient cash funds to call upon).   
Maybe an ad-hoc withdrawal should be made from the pension now to replenish those cash funds seeing as the markets are higher (maybe this is the plan too)

Maybe OP has wandered off after the deeply technical discussion!

Then the advice to freeze drawdown was correct at the time. The advisor choose the safety first option to protect their client. The roller coaster ride was an extreme one with no certainty of outcome. 

cfw1994

Thrugelmir said:

cfw1994 said:

dunstonh said:

BritishInvestor said:

cfw1994 said:

shinytop said:

cfw1994 said:

Is it just me, or has the intent of this thread disappeared in the bickering 
Anyone else got any *cough* actual experiences of drawdown pensions during 2020, and intentions in 2021?
Feels like there needs to be a separate and deeply technical thread for some posters.....

It happens to a lot of threads.  The OP askes how to wire a plug and before we know it people who have never wired a plug before are arguing about advanced electromagnetic theory. 

Seems to be precisely what has happened here.  I come back a few hours and 3 pages later and still no useful additions in the interim.......Where’s that “unsubscribe” button 

I'm not really sure what more you were expecting from the thread. There were several comments from people on here that have wired a plug, from electricians that wire plugs for a living, and from electricians that write books on how to wire plugs.
Many expressed surprise that the RCD had tripped given the mild spike in current and wonder why the power hadn't been restored sooner.

I think that is a fair assessment. 

We can eliminate all the posts talking about whether RL is a good option or not.  It is a simple option and does the job as well or better than all the other simple options out there.    It won't be best.  it won't be worst.  It will be like the rest of the simple options in being middle of the road.
The focus should really be on why there didn't appear to be the preparation for a negative period (maybe the was as the OP said they knew it could happen but didn't expect it so soon), the lack of any emergency fund outside of the pension (maybe there was and this was part of the plan to fall back on during negative periods)  and why such an extreme option of turning off the income altogether took place (again, maybe that was the plan if there were sufficient cash funds to call upon).   
Maybe an ad-hoc withdrawal should be made from the pension now to replenish those cash funds seeing as the markets are higher (maybe this is the plan too)

Maybe OP has wandered off after the deeply technical discussion!

Then the advice to freeze drawdown was correct at the time. The advisor choose the safety first option to protect their client. The roller coaster ride was an extreme one with no certainty of outcome. 

Maybe.....& yet @dunstonh above said "Nobody had their draw rate adjusted or their income turned off" for his clients.  
Which advisor made the right choice!
My personal view would be that I would have loved the ability to chose to "turn the taps off" for March-April, then perhaps restart, but actually taking that action at the time would perhaps be hard to time precisely enough....   

BritishInvestor

Thrugelmir said:

cfw1994 said:

dunstonh said:

BritishInvestor said:

cfw1994 said:

shinytop said:

cfw1994 said:

Is it just me, or has the intent of this thread disappeared in the bickering 
Anyone else got any *cough* actual experiences of drawdown pensions during 2020, and intentions in 2021?
Feels like there needs to be a separate and deeply technical thread for some posters.....

It happens to a lot of threads.  The OP askes how to wire a plug and before we know it people who have never wired a plug before are arguing about advanced electromagnetic theory. 

Seems to be precisely what has happened here.  I come back a few hours and 3 pages later and still no useful additions in the interim.......Where’s that “unsubscribe” button 

I'm not really sure what more you were expecting from the thread. There were several comments from people on here that have wired a plug, from electricians that wire plugs for a living, and from electricians that write books on how to wire plugs.
Many expressed surprise that the RCD had tripped given the mild spike in current and wonder why the power hadn't been restored sooner.

I think that is a fair assessment. 

We can eliminate all the posts talking about whether RL is a good option or not.  It is a simple option and does the job as well or better than all the other simple options out there.    It won't be best.  it won't be worst.  It will be like the rest of the simple options in being middle of the road.
The focus should really be on why there didn't appear to be the preparation for a negative period (maybe the was as the OP said they knew it could happen but didn't expect it so soon), the lack of any emergency fund outside of the pension (maybe there was and this was part of the plan to fall back on during negative periods)  and why such an extreme option of turning off the income altogether took place (again, maybe that was the plan if there were sufficient cash funds to call upon).   
Maybe an ad-hoc withdrawal should be made from the pension now to replenish those cash funds seeing as the markets are higher (maybe this is the plan too)

Maybe OP has wandered off after the deeply technical discussion!

Then the advice to freeze drawdown was correct at the time. The advisor choose the safety first option to protect their client. The roller coaster ride was an extreme one with no certainty of outcome. 

What is/was the worse case you were expecting, and what would temporarily turning off the taps have done to reduce that?
Equity falls? How far and for how long?
Bond falls? How far and for how long?
Inflation?

dunstonh

Maybe.....& yet @dunstonh above said "Nobody had their draw rate adjusted or their income turned off" for his clients. 
Which advisor made the right choice! 

Royal London sell units to pay for the draw.  They dont have a cash account within the pension.  Although there is a deposit fund available.  They dont have income units either.
There are multiple ways to run a drawdown strategy.   The 18-24 months of cash creates a drag during growth years.  It creates a buffer in negative years.  So, if we had 5 years of growth, the one fully invested, all things being equal, would do better than the one with cash reserves.  

My personal view would be that I would have loved the ability to chose to "turn the taps off" for March-April, then perhaps restart, but actually taking that action at the time would perhaps be hard to time precisely enough....  

What if we had 2-3 years of negative returns (as we did 20 years ago)?  Could you afford to turn the tops off for 2-3 years?
 
Being able to turn off the taps suggests sufficient cash reserves exist outside of the pension.  Otherwise, what would you live on?    So, in a way, drawing from cash within the pension or drawing from cash in your savings is very similar.

cfw1994

dunstonh said:

Maybe.....& yet @dunstonh above said "Nobody had their draw rate adjusted or their income turned off" for his clients. 
Which advisor made the right choice! 

Royal London sell units to pay for the draw.  They dont have a cash account within the pension.  Although there is a deposit fund available.  They dont have income units either.
There are multiple ways to run a drawdown strategy.   The 18-24 months of cash creates a drag during growth years.  It creates a buffer in negative years.  So, if we had 5 years of growth, the one fully invested, all things being equal, would do better than the one with cash reserves.  

My personal view would be that I would have loved the ability to chose to "turn the taps off" for March-April, then perhaps restart, but actually taking that action at the time would perhaps be hard to time precisely enough....  

What if we had 2-3 years of negative returns (as we did 20 years ago)?  Could you afford to turn the tops off for 2-3 years?
 
Being able to turn off the taps suggests sufficient cash reserves exist outside of the pension.  Otherwise, what would you live on?    So, in a way, drawing from cash within the pension or drawing from cash in your savings is very similar.

FWIW, yes, we could turn those taps off.  You suggest your clients could for perhaps 2 years too, right?

I see @BritishInvestor continues to ask questions, whilst providing no experienced answers.   Such a font of knowledge.....c'mon, share experiences...don't be shy!

NottinghamKnight

As a presumably inexperienced pensioner I'd be pretty annoyed if the FA I was paying for contacted me to say all income was being stopped at short notice, I'd assume he wasn't doing his job properly.  

jamesd

Thrugelmir said:

Then the advice to freeze drawdown was correct at the time. The advisor choose the safety first option to protect their client. The roller coaster ride was an extreme one with no certainty of outcome. 

The adviser failed to protect their client, who was relying on that income and who at the start of this, but hopefully not now, thought that having to stop income was expected and should continue to be done:

thriftytracey said:

... In March we received a call from our IFA to advise that our funds had lost about 20% due to Covid and to advise us to stop drawdown.  This was quite a substantial loss of income.  We still had my husband's DB pension.  I immediately went through all our SO and DD and cancelled discretionary ones.  We were able to save into a Holiday fund from his DB so we stopped this and drew it as additional income.  It represented 50% of our former income drawdown and we managed, discretionary spending helped by lockdown.  It wasn't great but we did not starve.  Thank heavens for his DB pension.  Otherwise it would have meant drawing down our modest savings.

...  I asked the IFA to start drawdown again for three months, October to December and to stop it in January 2021 not knowing how Brexit would affect the values. ...

I am hoping to start drawing down again in March or April when the vaccine will be more widely rolled out which may also give the markets an uplift. 

When you decide on drawdown we are made aware that there may be periods where we have to stop drawdown.  I never thought it would be so soon! 

Stopping a month of income is entirely wrong, both initially putting the client in a position where that can seem useful and in not recognising that over a 30-40 year plan a few percent of drop instead of cessation does the job. If a drop is prolonged it still doesn't matter if a safe withdrawal rate has been used because that handles the situation.

What the client needs is a robust plan that makes such foolishness unnecessary for a short drop. While their IFA seems to have tried to teach them to expect it instead  of planning to avoid it.

jamesd

cfw1994 said:

Maybe.....& yet @dunstonh above said "Nobody had their draw rate adjusted or their income turned off" for his clients.  
Which advisor made the right choice!

Dunstonh and just about every poster who makes suggestions about income drawdown here.

That's because including cash buffers is pretty much universal here and over the years the use of safe withdrawal rates has also become so. Which means that the client would have been kept well away from having to consider ceasing income drawing and if it did eventually happen, it would be gradual.

The adviser failed to put their client into a properly prudent plan.

BritishInvestor

cfw1994 said:

dunstonh said:

Maybe.....& yet @dunstonh above said "Nobody had their draw rate adjusted or their income turned off" for his clients. 
Which advisor made the right choice! 

Royal London sell units to pay for the draw.  They dont have a cash account within the pension.  Although there is a deposit fund available.  They dont have income units either.
There are multiple ways to run a drawdown strategy.   The 18-24 months of cash creates a drag during growth years.  It creates a buffer in negative years.  So, if we had 5 years of growth, the one fully invested, all things being equal, would do better than the one with cash reserves.  

My personal view would be that I would have loved the ability to chose to "turn the taps off" for March-April, then perhaps restart, but actually taking that action at the time would perhaps be hard to time precisely enough....  

What if we had 2-3 years of negative returns (as we did 20 years ago)?  Could you afford to turn the tops off for 2-3 years?
 
Being able to turn off the taps suggests sufficient cash reserves exist outside of the pension.  Otherwise, what would you live on?    So, in a way, drawing from cash within the pension or drawing from cash in your savings is very similar.

FWIW, yes, we could turn those taps off.  You suggest your clients could for perhaps 2 years too, right?

I see @BritishInvestor continues to ask questions, whilst providing no experienced answers.   Such a font of knowledge.....c'mon, share experiences...don't be shy!

I'm not sure there's an awful lot to say that hasn't been said already. Given:
A financial plan: That enables a retiree to focus on the 30-40 years of retirement rather than short term market movements
A withdrawal plan: That details exactly where the withdrawals are going to come from and what adjustments might need to be made, when, and how much
Lifeboat drills: Where past poor market outcomes are analysed at the outset of the relationship, the impact on the plan they might have and ensuring that the client (as best as they can) would stick with the plan went these poor market events occurred....

Realistically, all an adviser really needed to do in Feb/March of this year is phone their clients and remind them of the lifeboat drills and reassure them that their retirement plan was built to withstand events such as these and nothing needed to be done at that time.