Best way to save cash short medium term

Crudecheese

I need to replenish my cash savings ready to hopefully retire in a couple of years. I have about £500k in DC pension plus just over £4k per year DB pension. I will get full state pension. I am 62. Currently pay £1k into employer pension via Sal sac…thinking of increasing it to about £1,500 and putting the additional £500 into a cash fund. Is this a good idea??

dunstonh

thinking of increasing it to about £1,500 and putting the additional £500 into a cash fund. Is this a good idea??

You are retiring in a couple of years.  So, you should have your retirement income/capital strategy mapped out by now.   So, does this fit with that strategy?

e.g. what method of drawdown are you using?  What investment strategy are you using with drawdown (e.g. yield, total return etc).  How many years of worth of income are you going to hold as cash in the pension?     

Have you thought about these things yet? - if you have then your answer to your question should fit what you are targeting as your strategy.

tacpot12

I have to say that I've never been a fan of cash funds. They seem less safe than cash, while not offering any upside. My SIPP provider allows me to hold an unlimed amount of cash in the SIPP (it's more or less a requirement to operate the SIPP that you have some cash), and offers quite good interest rates for cash that you cash that you are willing to tie up for a year or more.

I think building up some cash in your DC pension is a good idea. I bought the Investment Trust holdings I wanted to have for my retirement about a year before I need to start drawing income so that I had a year worth of income already available as cash in my SIPP. As per Dustonh's suggestion, yo need to be thinking about how much cash you need to have available. 

I would recommend holding some cash outside of your pension schemes in case the provider has IT problems. Three months of income is the most you should need for this.