How is a smallish DC pot managed without an IFA

Taggy135

Just looking to understand how a DC pension pot is managed if not using an IFA.
OH has recently retired with state pension starting mid 2021-22. Since cash flow is not a problem due to savings, our aim is to take the pension money out of the DC pot while minimising tax. The pot is about 60K and is with Aegon. We have calculated the amount of UFPLS which can be withdrawn tax free in 2021-22, but we don't understand which investments to sell to change to cash in order to do this.  His pot was managed by an IFA while at work and is currently in cautious investments, but going forward they want to charge 1% per year to continue to manage it. When looking for quotes from other IFAs to compare with this we were told that it would not be cost effective for us to use IFA for this size of pot. We are just looking for very simple tools to manage the pot in a cautious way and doing an UFPLS once a year. After a bigger withdrawal this year, in future years we only intend to take the UFPLS amount on top of state pension while staying below personal allowance. How does this usually work for those not using an IFA in terms of selling investments, or should we carry on using the IFA? Many thanks for any help on this.

OldMusicGuy

You don't need any tools to manage it. You just need to decide what investment funds to put it in and then use the online tools that Aegon provides to sell some of the invested funds to give you the cash to withdraw. That is of course provided Aegon allows you to do that. If they do not, transfer it to a SIPP that supports UFPLS drawdown and away you go.

Albermarle

Most of the regular posters on here ( not all ) DIY their investments . ie without a financial advisor , and often much larger sums than you mention . How do they know what to do ? They have learnt about investing ( in some cases more than others ) from books, google , this forum etc 
It's like learning how to drive or mend a car . At first it seems difficult but eventually you get the hang of it ( mostly) .

OldMusicGuy

I'll add to Albermarle's post and say you might find this book helpful: "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" by John Edwards.

Taggy135

Thank you. Will certainly look at the book by John Edwards. 

One more question - what is the difference between using the UFPLS, and using Flexi-drawdown. Would Flexi-drawdown be an option for taking a calculated amount of taxable income from the pension to make it up to the personal allowance, while possibly leaving the tax free 25% still invested in the pension, or do we still need to take out the 25% tax free in the manner of UFPLS? Not sure how the two are different? 

Albermarle

With UFPLS , if you take say £10K from the pension , then 25% is tax free and 75% is potentially taxable. These proportions are always the same for a UFPLS payment , whatever the size.
With Flexi drawdown , you could for example take all the 25% tax free first and then the taxable income later . Or take some tax free, and some taxable, but not necessarily in the same 25:75 proportions. Some providers offer more flexibility than others in what you can do .
What you can not do is what you have suggested . Until you take some tax free cash , you do not create any taxable portion of the pension.

Thrugelmir

Albermarle said:

Most of the regular posters on here ( not all ) DIY their investments . ie without a financial advisor , and often much larger sums than you mention . How do they know what to do ? They have learnt about investing ( in some cases more than others ) from books, google , this forum etc 
It's like learning how to drive or mend a car . At first it seems difficult but eventually you get the hang of it ( mostly) .

I'd not recommend DIY for someone who has retired and has no previous experience. Unless they've no concerns with regards to permanent loss of capital. To the uninitiated the choice of investments is totally bewildering and confusing. That's before one even starts to comprehend the worlds of business, economics and political events that influence market behaviour. Plenty of low cost options are available for those who are looking for actively managed passive investments. 

Taggy135

Thank you - where would we look for low cost options for actively managed passive investments? Is this something that Aegon could provide themselves  - because speaking on the phone it did not seem to be something they offer.

Albermarle

Thrugelmir said:

Albermarle said:

Most of the regular posters on here ( not all ) DIY their investments . ie without a financial advisor , and often much larger sums than you mention . How do they know what to do ? They have learnt about investing ( in some cases more than others ) from books, google , this forum etc 
It's like learning how to drive or mend a car . At first it seems difficult but eventually you get the hang of it ( mostly) .

I'd not recommend DIY for someone who has retired and has no previous experience. Unless they've no concerns with regards to permanent loss of capital. To the uninitiated the choice of investments is totally bewildering and confusing. That's before one even starts to comprehend the worlds of business, economics and political events that influence market behaviour. Plenty of low cost options are available for those who are looking for actively managed passive investments. 

I was not really recommending anything . The OP was enquiring generally what people did if they did not have an IFA and I just said many people DIY .
In any case buying actively managed passive investments without an IFA , is still DIY , just on a more basic level.
OP - Aegon must have some kind of simple  multi asset funds ( which are actively managed passive investments ) Can you say which funds you currently have with them ?
Normally for a fund of £60K , one or two funds should be sufficient, but maybe the IFA previously picked a more complicated structure .

dunstonh

 Is this something that Aegon could provide themselves

Does your Aegon pension support UFPLS?  (a lot of their legacy plans do not.  Nor does their RetireReady plan - ironic plan name really for a plan that is not able to support drawdown).

OldMusicGuy

Thrugelmir said:

I'd not recommend DIY for someone who has retired and has no previous experience. Unless they've no concerns with regards to permanent loss of capital. To the uninitiated the choice of investments is totally bewildering and confusing. That's before one even starts to comprehend the worlds of business, economics and political events that influence market behaviour. Plenty of low cost options are available for those who are looking for actively managed passive investments. 

I take a different view. There's different types of DIY. I manage a fund significantly in excess of the OP's and I have no prior experience. It is my only retirement fund. It need not be complicated unless you want to try to build a multi-sector portfolio like an IFA might. You don't need experience but you do need to educate yourself, which is why books like the John Edwards one are very helpful, as are sites like Monevator and Pensioncraft.