What is meant by 'cash savings for retirement'?

lucyandthomas

When talking about keeping some money in cash in retirement, so it can be used rather than selling funds when markets are low, does this mean having money outside the pension completely (savings accounts, cash ISAs etc) or having a cash holding within the pension?

After the age of 55/57, does it make sense to have some cash savings within a pension so it benefits from tax relief?

Many thanks

MK62

It could be either, depending on how you've set your portfolio up....I prefer it outside, but I wouldn't pay extra income tax just to get it outside if it was currently inside the pension.

Leaving cash in a pension won't get any extra tax relief as such......the tax relief was already applied when the money was paid into the pension (or shortly after).

MK62

Don't forget the tax free lump sum though....usually the ideal way to create a retirement cash pot outside the pension (assuming that's what you want to do of course)

dunstonh

When talking about keeping some money in cash in retirement, so it can be used rather than selling funds when markets are low, does this mean having money outside the pension completely (savings accounts, cash ISAs etc) or having a cash holding within the pension?

Either depending on your retirement income strategy.

Some people can be heavier in money externally (savings, ISA etc).  Some can be heavier in their pension than external.   

You can do it either way.

After the age of 55/57, does it make sense to have some cash savings within a pension so it benefits from tax relief?

Depends on when you intend to start drawing your pension and the method you are using.   If you plan to start drawing at 67 then having cash in your pension at 55 is not important and not really a good idea for much cash compared to if you plan to start drawing at say 57.  There it would make more sense to be building your cash float.

zagfles

lucyandthomas said:

When talking about keeping some money in cash in retirement, so it can be used rather than selling funds when markets are low, does this mean having money outside the pension completely (savings accounts, cash ISAs etc) or having a cash holding within the pension?

After the age of 55/57, does it make sense to have some cash savings within a pension so it benefits from tax relief?

Many thanks

Been several long threads about this eg https://forums.moneysavingexpert.com/discussion/6330736/what-is-your-trigger-point-to-start-spending-from-cash-buffer-qe-does-it-change-the-game/

The point is, you need to make a judgement about when the market is "low" and so you start drawing from cash. Then you'll need to make a judgement when the market is "high" so you can replenish your cash. So you need to think you know better than the collective market opinion which sets prices. You need to "time" the market. If you're capable of doing that, you should already be filthy rich.

As you can see on the above thread which got to 21 pages, nobody really answered the OP's question.

jim8888

I have a Vanguard 80/20 Lifestyle fund. This means I have 80% of the fund in shares and 20% in "safer" bonds, which I tell myself is almost like a cash equivalent. The trouble is, it's not like that when I come to sell, because I can't instruct Vanguard to sell only equities or bonds in this fund, I have to sell units of the 80/20 fund as a total. That may be an obvious point, but it wasn't what I thought about when I was investing my money. I put in my £100 and thought "That's £80 in shares and £20 in bonds (cash)". It only struck me when I came to withdraw from it that my bonds (cash) element wasn't really that at all! Partly because of this, I now have a "real" cash fund in a bank account that has been realised by selling units of the 80/20 fund. This cash fund is the equivalent to two years worth of my household budget, which is what I withdraw from to live on month to month. I top back up each year - providing the markets aren't a completer disaster - by selling the equivalent of the 80/20 fund and therefore always have at least a full year's budget cover in cash in the bank.  Of course, if the markets ARE a complete disaster, I can then sweat it out for a further year in the hope they recover, but for the moment I'm planning to sell each year regardless. After all, who knows when best to catch a falling knife? 

Albermarle

 This means I have 80% of the fund in shares and 20% in "safer" bonds, which I tell myself is almost like a cash equivalent. 

I think this theory has been somewhat undermined so far this year. Cash does not fall 15% in 6 months .

lucyandthomas

Thanks all - will carry on as I was then, keeping cash savings outside my pension.

jim8888

Albermarle said:

 This means I have 80% of the fund in shares and 20% in "safer" bonds, which I tell myself is almost like a cash equivalent. 

I think this theory has been somewhat undermined so far this year. Cash does not fall 15% in 6 months .

"i'm in it for the long term".