Royal London Drawdown Pension - reducing monthly income

thriftytracey

Good Morning helpful people

I checked my pension today and it has lost £25,000 in value since August when I last checked.  I have posted on here before about falling values and I know that there are ups and downs and it should even out over time.  I feel the current situation is different especially as we are heading towards a recession, coupled with what's going on politically and economically.

So, I have decided to reduce my drawdown by just over 50%.  I can made up the shortfall from savings.  I am 62, so a while to go before I qualify for the state pension.

I draw £500 as tax free cash and £600 from funds.  I intend to take £500 going forward.  I guess it is a no brainer that I ask them to draw the £500 from the tax free cash as it is not in funds?  Or maybe it is, according to the list below there doesn't seem to be a "cash fund" as such:-

RLP Sterling Extra Yield Bond	£17,196.99
		RLP Global Managed	£78,295.92
		RLP Short Term Fixed Income	£20,374.48
		RLP Property	£19,689.85
		RLP Deposit	£15,841.26
		RLP Medium (10yr) Gilt	£28,775.10
		RLP Absolute Return Government Bond	£12,263.19
		RLP Medium (10yr) Corporate Bond	£25,143.08
		RLP Medium (10yr) Index Linked	£24,757.36
		RLP Global High Yield Bond	£12,685.18
		RLP Short Duration Global High Yield	£2,870.64
		RLP Commodity	£13,914.05
		RLP Short (5yr) Corporate Bond              £1,352.58

Many thanks

wjr4

The tax free cash is invested, it will be sold as and when you request the sale of funds. RLP Deposit is the closest to cash 

Albermarle

I checked my pension today and it has lost £25,000 in value since August when I last checked.  I have posted on here before about falling values and I know that there are ups and downs and it should even out over time.  I feel the current situation is different especially as we are heading towards a recession, coupled with what's going on politically and economically.

Overall your investment portfolio is rather skewed towards bonds and gilts. Normally these are rather stable, but have been hit badly by global economic conditions, and for the UK ones an extra twist of the knife due to the mini budget fiasco. Ironically if it had less bonds/gilts, and more 'risky' equities/shares it would not have fallen so much.

For the future yes most likely a recession is coming. However those clever people in the City will also have noted this, and it is already taken account of in the market prices. So maybe not a bad idea to reduce your drawdown for now, but do not automatically assume that due to all the doom and gloom in the news, that this will necessarily have further negative effects on your pot.

[Deleted User]

You’ll have to sell units to get your 500. 

Recession would be a great thing for this portfolio. It would force interest rates and inflation down. And hence bond prices would go up. 

dunstonh

Royal London do not have a cash account on their pension product.  Although with some drawdown scenarios, they do have a cash function which can be turned on/off.  Its not a cash account but it places money into cash  to cover x months worth of withdrawals.

I feel the current situation is different especially as we are heading towards a recession, coupled with what's going on politically and economically.

As said by a number of inexperienced investors in every single previous negative period.  Yet diverse portfolios have always recovered.

ukdw

If the around £273k worth of funds listed is where the £600 is coming out of then it looks like a withdrawal rate of about 2.4%

£25k down from £300k previously is just over 8.3% down which isn't that unusual.

The £600 withdrawals you have stopped are about 0.2% of the fund - so stopping them or leaving them running isn't going to have a big impact unless you leave them off off for several years.

I've considered doing the same thing and lowering or stopping my drawdowns when things go down, but haven't for 2 reasons
1. Tax complication - if I lower the drawdowns now and then increase them again in the future when things recover it will mean the amount of tax levied will get a bit messed up, and may result in having to claim some back.  I've instead tended to let the drawdowns carry on - but then reinvest the money straight away into an ISA when prices are cheap.

2. I tend to also look back to see when the pension was at a similar level - probably some time last year - and think whether at that time I felt I needed to stop withdrawals.   In my case the last time my pension was at Todays levels it was actually up on previous levels so I felt quite confident at the time.

Albermarle

The £600 withdrawals you have stopped are about 0.2% of the fund - so stopping them or leaving them running isn't going to have a big impact unless you leave them off off for several years.

Rereading the OP, it is not clear at what frequency they are making drawdown withdrawals.

Presumably it is monthly, then the current annual drawdown, would be £ 13,200, which is a drawdown rate of nearly 5%.

This is a bit on the high side anyway, especially considering the low % equity in the portfolio, so maybe not a bad idea to reduce it a little anyway. On the other hand their SP is due in 4 years, so maybe they can just reduce the drawdown then, 

thriftytracey

I don't pay tax.  I have now reduced my drawdown and husband stopped his for now (his fund is smaller) but still lost £15k.

I will continue to review.  I hope it won't be for four years 

Albermarle

thriftytracey said:

I don't pay tax.  I have now reduced my drawdown and husband stopped his for now (his fund is smaller) but still lost £15k.

I will continue to review.  I hope it won't be for four years 

When you review it might be useful to do three things.
Firstly think in terms of % drops or growth, rather than 'it is £15K down'
Then also look back over the years, and see how it has performed over the last 5 or even 10 years, to get a better sense of perspective on any short term moves.
Thirdly you may want to review your portfolio of funds. There seems rather a lot and two have very small amounts in them. Plus maybe an increase in the equity %.

thriftytracey

Albermarle said:

thriftytracey said:

I don't pay tax.  I have now reduced my drawdown and husband stopped his for now (his fund is smaller) but still lost £15k.

I will continue to review.  I hope it won't be for four years 

When you review it might be useful to do three things.
Firstly think in terms of % drops or growth, rather than 'it is £15K down'
Then also look back over the years, and see how it has performed over the last 5 or even 10 years, to get a better sense of perspective on any short term moves.
Thirdly you may want to review your portfolio of funds. There seems rather a lot and two have very small amounts in them. Plus maybe an increase in the equity %.

I did select a cautious risk profile so that is why the equity is low and preponderance of bonds/gilts.  I wouldn't have a clue about changing funds.  It does seem illogical to have two funds with small amounts in them.  I suppose bonds/gilts in a cautious drawdown off the shelf type product were regarded as fairly "steady and stable" before the latest government mini budget.

Albermarle

thriftytracey said:

Albermarle said:

thriftytracey said:

I don't pay tax.  I have now reduced my drawdown and husband stopped his for now (his fund is smaller) but still lost £15k.

I will continue to review.  I hope it won't be for four years 

When you review it might be useful to do three things.
Firstly think in terms of % drops or growth, rather than 'it is £15K down'
Then also look back over the years, and see how it has performed over the last 5 or even 10 years, to get a better sense of perspective on any short term moves.
Thirdly you may want to review your portfolio of funds. There seems rather a lot and two have very small amounts in them. Plus maybe an increase in the equity %.

I did select a cautious risk profile so that is why the equity is low and preponderance of bonds/gilts.  I wouldn't have a clue about changing funds.  It does seem illogical to have two funds with small amounts in them.  I suppose bonds/gilts in a cautious drawdown off the shelf type product were regarded as fairly "steady and stable" before the latest government mini budget.

Bonds and Gilts had already declined steeply this year before the mini budget, although that did not help, especially for UK ones.
They had outperformed over previous years and this has been a big correction.