Pension planning thoughts

Brie

OK so going over and over and round and round with my ideas on what to do about the pensions.....it would be helpful to get any ideas or point out what I've got wrong.

I am currently employed but about to be made redundant!  Hurrah!! (seriously)  It's a bit earlier than I would like being a mere 64.5 when I leave the company but it also means I get a decent payout as well as being able to collect my pensions.

So the plan is that I take the 25% lump on an old DB pension and put that in an investment ISA.  If I can generate a 5% return on average this will match what I'd get if I took the whole DB without reduction.  Is that worth doing?

I have another old DC scheme which I will likely transfer to a SIPP asap.  I also have my current employment DC scheme which I am thinking I'll put in the same SIPP.  Is there any reason to take the 25% lump from either of these.

SP will kick in an 18 months but I also have a foreign SP which should start later this year. So those with my DB will generate a good steady income - lower than what I earn now but not far off as I'm not very well paid!  I'm looking at taking pensions at full or nearly full value without reduction for my spouse as I can't see that these will be required given the other money that will be available in the future.  (large inheritance expectations)

I've opened the ISA but not put any money in and am unlikely to have anything to put in for this tax year unless I can quickly access some cash in a foreign bank account.

I haven't yet opened the SIPP but expect I will do that with the same provider as the ISA as I will get exceptionally good rates.

I intend to continue to work so may have another OP (likely DC as everything is these days) which I will pay in to in order to max the employer contribution.

I also have a nice basket of sharepurchase/sharesave options that I can exercise later this year and if the price remains as low as currently I will shift into an investment account with the ISA provider to wait for the market to turn.  

In England, should it make a difference.  Low tax bracket and it would take an extreme income event to boost me to whatever the higher rate starts at (£51k?).  Redundancy money is nearly enough to nuke the flexi mortgage without any penalty charges.  I have chatted with an IFA in general but not received any concrete advice but will do so once there's an influx of money due to inheritance as that will be too risky for me to DIY.

Your thoughts/concerns/warnings/advice?

And finally - if you wanted to learn more about investing where would you go?  I'm allowed a training grant due to redundancy and think that if I'm going to be doing my own share trading it might be good to learn more.  I've done it in the past but it's been a few years so want to get up to date on stuff.  I think the grant would be possible if I present the training as a tool for my self employment which essentially it will be.
 

NedS

Brie said:

So the plan is that I take the 25% lump on an old DB pension and put that in an investment ISA.  If I can generate a 5% return on average this will match what I'd get if I took the whole DB without reduction.  Is that worth doing?

The general comments here seems to be if you have a use for the lump sum, then great. But if all you are intending to do is invest it in an ISA and hope to achieve the same return as you would have got from the DB (guaranteed, plus inflation-linked?), why take the risk?

Factors that may move it to favour taking the lump sum would be if there is no inflation linking (or capped at a low rate which you expect long term inflation to exceed). You seem to have plenty of other non-fixed income assets (redundancy pay, SIPPs, savings).

Thrugelmir

Brie said:

And finally - if you wanted to learn more about investing where would you go?  

If you are expecting to learn how to achieve an annual 5% return on your investments then you are going to be very disappointed. 

jim8888

Thrugelmir said:

Brie said:

And finally - if you wanted to learn more about investing where would you go?  

If you are expecting to learn how to achieve an annual 5% return on your investments then you are going to be very disappointed. 

I'd second that. The only thing, IMHO, that you need to know about investing is to do it passively through global index trackers with low-fee companies like Vanguard. Hopefully you're not seriously thinking about active share trading running forward? Professional fund managers, for whom this is a full time job, struggle to beat the indexes despite having massive amounts of data, analysis, resources and research behind them.

jimi_man

Thrugelmir said:

Brie said:

And finally - if you wanted to learn more about investing where would you go?  

If you are expecting to learn how to achieve an annual 5% return on your investments then you are going to be very disappointed. 

Very possibly, however I would argue that by learning about investing then they might be in a much better position to understand why that’s the case. 

LHW99

I have another old DC scheme which I will likely transfer to a SIPP asap.  I also have my current employment DC scheme which I am thinking I'll put in the same SIPP.

Worth checking and comparing the charges on these / whether you can drawdown from either / both or if you have to transfer to a newer scheme / whether there are any guarateed annuity rates.

Thrugelmir

jimi_man said:

Thrugelmir said:

Brie said:

And finally - if you wanted to learn more about investing where would you go?  

If you are expecting to learn how to achieve an annual 5% return on your investments then you are going to be very disappointed. 

Very possibly, however I would argue that by learning about investing then they might be in a much better position to understand why that’s the case. 

Deciding whether to take the maximum cash from the DB is an irreversible decision though. That's the context in which I responded. 

Brie

Thrugelmir said:

Brie said:

And finally - if you wanted to learn more about investing where would you go?  

If you are expecting to learn how to achieve an annual 5% return on your investments then you are going to be very disappointed. 

Thanks to everyone for the replies.  It's helpful to organise my thoughts and see what jumps out to dismay others!!

As for investing with a view to doing everything myself.  No - that wasn't my plan.  Do some small portion, yes - because I find finance interesting and have done share investing in the past.  But I'm eligible for a free training grant so thought I might try to do something both interesting and practical.  Ultimately I might end up putting in some time at CAB or someplace and it would be good to have some proper training.

Audaxer

Brie said:

So the plan is that I take the 25% lump on an old DB pension and put that in an investment ISA.  If I can generate a 5% return on average this will match what I'd get if I took the whole DB without reduction.  Is that worth doing?

If you are planning on drawing down 5% increasing by inflation each year, similar to what you would get from your DB pension, that is unlikely to last through a long retirement unless you get a favourable sequence of returns. For example 5% average returns with a poor sequence of returns in the first decade, could see you running out of money. However if you need less than 5% withdrawals after receipt of your State Pension, then it could work out okay for you.