Made the decision

garrob

I have finally set a date for leaving my work and getting a part time job for a few days a week. I will cease employment in June 22 as I can no longer take all the rubbish that goes on every day, in my 22 years that I have been there this is the worst it has been.
Anyway, I have a DB pension of £8500 per year that is it reduced for taking it early and a lump sum of £56,000. I will get the full state pension at 66. I am 62 just now and with the part time work I will take home £900 per month. I also have a DC pension which I am still paying into through my work which is £110,000. Savings at present is £30,000.
My wife will continue to work for another 5 years in her civil servant role as she is younger than me and earns 40,000 pa. No mortgage and both kids are working but still live at home.
I have read a few books on pensions but it doesn’t seem to be sinking in at all. I still don’t know what to do with my DC ! I know I will want to drawdown this element at some point but as I have very limited knowledge/ understanding I was looking for some pointers as to where to put this money. It would be a transfer and leave it arrangement. I have looked at Vanguard but still unsure. I will be taking my lump sums for sure as I had a scare at the beginning of the year with COVID and ended up in Hospital with 2 massive blood clots in my lungs, so that is reason for taking the lump sums. Many thanks.

Dazed_and_C0nfused

I will get the full state pension at 66. I am 62 just now

As you have a reasonable DB pension have you actually checked this on gov.uk and established what you will have accrued by 5 April 2022 or is it based on an assumption?

NannaH

Will you continue part time until age 66? 

When do you plan to start your drawdown?
Assuming you won’t be paying into your current work DC, who is it with and what are the charges / is it suitable for drawdown?  Is it a narrow range of investments that you might like to change? 

Given that you have a decent DB, I think that taking the tax free cash up front is a good idea as you’ll be a tax payer ( unless you decide to stop the pt job before 66.  

 You can then leave the rest of the pot to grow,  the only decision then is the structure of your investments,  I think I would be inclined to go for income funds and build up a cash pot within the pension.  That’s probably what we’ll do in 5 years time with the main dc pot that won’t be used for early retirement,  rather than increase the bonds allocation ( unless bonds start doing well) 

garrob

You can get your State Pension on 12 February 2026. Your forecast is

£186.39 a week

£810.46 a month, £9,725.56 a year

Your forecast

• is not a guarantee and is based on the current law
• is based on your National Insurance record up to 5 April 2021
• does not include any increase due to inflation

£186.39 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions until 12 February 2026 as they fund other state benefits and the NHS.

This it what it states on the gov gateway site.

garrob

Thank you for the replies.
I think I will continue to work to at least 65, the job will be far easier than my present one so I will just take each day as it comes.
Not sure when I will start my drawdown, but it is with Barnett Waddingham and they don’t do drawdown.

tacpot12

Your part-time employment will bring in about the same as your state pension, so while you are able to work, you can keep your income at about £18K pa, and you will have used all your personal allowance if you do so. With your wife's income, it seems unlikely that you need to draw on your DC pension at all. As you wife is younger than you, one option is to just leave it accumulating until she is ready to retire. You can then see if you want to do something with it. 

Have you made a nomination as to who is to receive your DC pension if your die? If not, I would make this a priority. 

One option for drawdown would be AJ Bell. I use them for my SIPP (which I am drawing down from) and find them reliable and good value. You only need one option, so you can keep AJ Bell in the back pocket while you look to see if you can improve on what they offering. 

As to what to invest in for drawdown, the two main options to consider are investing in assets that you sell when you want to draw out an income, and investing in assets that produce a natural yield. I am mainly taking this latter approach with my pension; my investments are producing a natural yeild of just over 4% pa, and they have also grown in value by about 3% pa, so I am drawing out the natural yeild, but not selling any assets.

I would recommend that you move away from any provider that doesn't offer drawdown a few months ahead of when you want to start drawing down, as the transfer might take a month or two, and longer if there are problems, plus you need to have to some cash in your pension account to be paid out. I bought my income-producing assets 12 months ahead of when I wanted to start drawing down, so that I had a year's worth of cash in the account.  

garrob

Many thanks tacpot12 really useful information. I was thinking of not touching my DC as you said. I will just leave it growing in a SIPP. Does AJ Bell offer a fund with all these assets or am I completely on the wrong track? As I said I am trying to understand the pension minefield but failing miserably. I would like a fund that offers drawdown and I can just lock it and leave it with the fund doing all the work.

Albermarle

garrob said:

Many thanks tacpot12 really useful information. I was thinking of not touching my DC as you said. I will just leave it growing in a SIPP. Does AJ Bell offer a fund with all these assets or am I completely on the wrong track? As I said I am trying to understand the pension minefield but failing miserably. I would like a fund that offers drawdown and I can just lock it and leave it with the fund doing all the work.

A J Bell is an investment platform with a huge choice of investments . The platform organises the mechanics of the pension, such as drawdown and taking tax due . However you have to choose which investments you want .
To make it easier for beginners, they offer some ready made funds and some purpose designed 'Investment pathways' for people taking their pension who have little knowledge of investments. All the pension providers offer them . For example 
Investment Pathways | What is investment pathways? | Fidelity
Investment Pathways - Aviva

So just be clear about the difference between the pension/SIPP provider and the investment funds held within the pension .
A lot of people mix them up , which is understandable if say the AJ Bell platform offers AJ bell branded investment funds but they are two different things .

garrob

Many tanks for the information Abermarle I will have a look at that. The DC pension I am paying into at the moment is through my work and Barnett Waddingham have put it in to low risk funds as I approach retirement but I will need to move it when I leave the company in June, but saying that a colleague of mine was made redundant a month ago and BW told him he could leave his DC  going with them and there would be no charges, saying that I don’t know how much it would make.

Albermarle

garrob said:

Many tanks for the information Abermarle I will have a look at that. The DC pension I am paying into at the moment is through my work and Barnett Waddingham have put it in to low risk funds as I approach retirement but I will need to move it when I leave the company in June, but saying that a colleague of mine was made redundant a month ago and BW told him he could leave his DC  going with them and there would be no charges, saying that I don’t know how much it would make.

In the past most people on retirement exchanged their DC pension pot for an annuity ( basically a guaranteed annual pension income) in this case it made sense for the pot to be moved to lower risk investments as you neared retirement age . This avoided/reduced the potential for a market crash just before retirement and significantly affecting the size of annuity you could buy .It is called derisking .
With a long drawdown and/or not accessing the pot for many years, it is better not to derisk too much , and at least stay with medium risk investments.
Going too low risk is actually a risk in itself in that you are missing out on potential growth and hopefully at least beating inflation. 

NannaH

Low risk usually means a very high bonds allocation,  bonds currently have abysmal performance,  barely better than cash. Totally unsuitable for long term growth,  60% equities:40% bonds is the oft quoted ‘balanced’ approach but with bond performance so low it’s better to go for a higher percentage whole world diversified fund of funds, low cost and spreads the risk, although 60% US weighting is normal, so if you believe the doom sayers on youtube, it might be beyond your risk appetite. 

If you have a few years in cash funds then if the markets crash you won’t panic and sell funds. 

I’ve streamlined my own sipp and am investing 50/50 in VLS80 (so 20% bonds)  and HSBC FTSE all world fund going forward, both have low costs. 

DH will transfer his work scheme to AJ bell when he retires as that’s the pot we’ll use for early retirement so it will have 3-5 years in cash in it, plus income funds,   no tax free lump sum as UFPLS will give him more tax free income along side his DB.  

We are 56 and 90% of our whole portfolio is in equities with a 15% UK weighting, which is possibly a bit too high but will come down over the next 4 years as I’ve tweaked future contributions.