Have 10% inflation and falling markets affected your drawdown plan?

bostonerimus

28, 100k and 7-8% is either a troll or someone who is divorced from reality. If the latter then it’s a scary story. I hope there are more posts that more reality based.

DairyQueen

I rebalanced out portfolio to overweight cash 2 years ago. I wanted to ensure that we had sufficient cash to see us both through to SP should the markets tank. We have already suffered 2 years of inflation erosion in real terms but the damage would have been greater out of cash.

We are fortunate to have a part-inflation protected DB (ceilings of 5% and 2.5%) and OH has been offered sufficient consultancy work (3 days per month) to make up the difference, and provide some extra income.

Our portfolio is down 7.9% year-on-year so could be much worse.

We will continue to front-load drawdown from cash until SPs kick in (2023 and 2025) and review the asset mix when the markets settle. 

bostonerimus

My observation is that quite a few people answering have DB pensions, that begs the question of why more without DB's aren't answering...maybe it's too scary to think about, and that SP is a critical part of everyone's plan which makes the Hunt/Sunak Fiscal statement all the more nerve wracking.

NedS

bostonerimus said:

My observation is that quite a few people answering have DB pensions, that begs the question of why more without DB's aren't answering...maybe it's too scary to think about, and that SP is a critical part of everyone's plan which makes the Hunt/Sunak Fiscal statement all the more nerve wracking.

I've been thinking about the triple lock, and what it may mean if they were to get rid of it. Which part of the triple lock would be ditched - link to earnings, minimum 2.5% or the link to inflation? I can understand if they may want to ditch either or the first two, but surely the link to inflation has to stay for the long term? They may want to ensure the SP does not continue to grow in real terms, but surely having a SP that will not keep up with inflation would be a big mistake? In a year when inflation is high, if they were to ditch the "triple lock" by ditching the first two, would anyone really care that much (rightly or wrongly) as the only thing anyone is thinking about right now is high inflation.

bostonerimus

NedS said:

bostonerimus said:

My observation is that quite a few people answering have DB pensions, that begs the question of why more without DB's aren't answering...maybe it's too scary to think about, and that SP is a critical part of everyone's plan which makes the Hunt/Sunak Fiscal statement all the more nerve wracking.

I've been thinking about the triple lock, and what it may mean if they were to get rid of it. Which part of the triple lock would be ditched - link to earnings, minimum 2.5% or the link to inflation? I can understand if they may want to ditch either or the first two, but surely the link to inflation has to stay for the long term? They may want to ensure the SP does not continue to grow in real terms, but surely having a SP that will not keep up with inflation would be a big mistake? In a year when inflation is high, if they were to ditch the "triple lock" by ditching the first two, would anyone really care that much (rightly or wrongly) as the only thing anyone is thinking about right now is high inflation.

Dropping the inflation link for SP would make it easier to do the same for benefits, but I think that politically the two types of payments are linked, it would cause a massive backlash across the country and even within the Conservative Party if inflation linking was lost on either. As tax rises are going to be tough for Hunt/Sunak to do I really think they are in a tricky spot. Maybe we'll get some sort of time limited suspension? Long term the triple lock could be kept, but the SP age could be raised and benefits further restricted, what we need is "gwroth, gwroth, gwroth". I always though that slogan was so banal as to be meaningless, all modern economies depend on growth (for better or worse), it's how you get that growth that is the tricky thing.

NedS

bostonerimus said:

NedS said:

bostonerimus said:

My observation is that quite a few people answering have DB pensions, that begs the question of why more without DB's aren't answering...maybe it's too scary to think about, and that SP is a critical part of everyone's plan which makes the Hunt/Sunak Fiscal statement all the more nerve wracking.

I've been thinking about the triple lock, and what it may mean if they were to get rid of it. Which part of the triple lock would be ditched - link to earnings, minimum 2.5% or the link to inflation? I can understand if they may want to ditch either or the first two, but surely the link to inflation has to stay for the long term? They may want to ensure the SP does not continue to grow in real terms, but surely having a SP that will not keep up with inflation would be a big mistake? In a year when inflation is high, if they were to ditch the "triple lock" by ditching the first two, would anyone really care that much (rightly or wrongly) as the only thing anyone is thinking about right now is high inflation.

Dropping the inflation link for SP would make it easier to do the same for benefits, but I think that politically the two types of payments are linked, it would cause a massive backlash across the country and even within the Conservative Party if inflation linking was lost on either. As tax rises are going to be tough for Hunt/Sunak to do I really think they are in a tricky spot. Maybe we'll get some sort of time limited suspension? Long term the triple lock could be kept, but the SP age could be raised and benefits further restricted, what we need is "gwroth, gwroth, gwroth". I always though that slogan was so banal as to be meaningless, all modern economies depend on growth (for better or worse), it's how you get that growth that is the tricky thing.

I think they could drop the link to earnings and minimum 2.5% increase (that's the bad new) on the basis that is it unsustainable in the long run, but hey, you still get your 10.1% CPI increase in April - and they would probably get away with that.

They may go with a lower link to earnings this year for work-related benefits, but retain the CPI link for disability benefits.

I can't see them raising income tax given the manifesto commitments upon which they were elected, but they could continue to freeze thresholds dragging more people into taxation through fiscal drag. But it's difficult to see how they can plug a £50bn spending gap. Pension reforms (40% tax relief) could be an option to raise some cash, but I'm not sure they could push that through for April 2023. I think we will be doing well to avoid a recession in the next 12 months, so any growth would be a huge win. Ultimately though, I fear a recession is the only thing that is going to get inflation back under control given the gulf between inflation and BoE interest rates, and an apparent unwillingness to raise them hard and fast.

bostonerimus

If I was doing something like a 4% index linked drawdown my nerve would have broken by now and I'd be looking to reduce my spending considerably, be spending from cash reserves and probably trying to use only dividends and interest payments from my investments to preserve capital.

marlot

bostonerimus said:

NedS said:

bostonerimus said:

My observation is that quite a few people answering have DB pensions, that begs the question of why more without DB's aren't answering...maybe it's too scary to think about, and that SP is a critical part of everyone's plan which makes the Hunt/Sunak Fiscal statement all the more nerve wracking.

I've been thinking about the triple lock, and what it may mean if they were to get rid of it. Which part of the triple lock would be ditched - link to earnings, minimum 2.5% or the link to inflation? I can understand if they may want to ditch either or the first two, but surely the link to inflation has to stay for the long term? They may want to ensure the SP does not continue to grow in real terms, but surely having a SP that will not keep up with inflation would be a big mistake? In a year when inflation is high, if they were to ditch the "triple lock" by ditching the first two, would anyone really care that much (rightly or wrongly) as the only thing anyone is thinking about right now is high inflation.

Dropping the inflation link for SP would make it easier to do the same for benefits, but I think that politically the two types of payments are linked, it would cause a massive backlash across the country and even within the Conservative Party if inflation linking was lost on either. As tax rises are going to be tough for Hunt/Sunak to do I really think they are in a tricky spot. Maybe we'll get some sort of time limited suspension? Long term the triple lock could be kept, but the SP age could be raised and benefits further restricted, what we need is "gwroth, gwroth, gwroth". I always though that slogan was so banal as to be meaningless, all modern economies depend on growth (for better or worse), it's how you get that growth that is the tricky thing.

As someone who had his University tuition paid by the state, I'm astonished that governments have got away with putting an extra 9% on young people's income tax.

Perhaps the fair way out would be to merge income tax and national insurance (and abolish student loan repayments)?  This would mean retired people would essentially pay NI on their pensions.

A hard one to sell though.

marlot

NedS said:

bostonerimus said:

NedS said:

bostonerimus said:

My observation is that quite a few people answering have DB pensions, that begs the question of why more without DB's aren't answering...maybe it's too scary to think about, and that SP is a critical part of everyone's plan which makes the Hunt/Sunak Fiscal statement all the more nerve wracking.

I've been thinking about the triple lock, and what it may mean if they were to get rid of it. Which part of the triple lock would be ditched - link to earnings, minimum 2.5% or the link to inflation? I can understand if they may want to ditch either or the first two, but surely the link to inflation has to stay for the long term? They may want to ensure the SP does not continue to grow in real terms, but surely having a SP that will not keep up with inflation would be a big mistake? In a year when inflation is high, if they were to ditch the "triple lock" by ditching the first two, would anyone really care that much (rightly or wrongly) as the only thing anyone is thinking about right now is high inflation.

Dropping the inflation link for SP would make it easier to do the same for benefits, but I think that politically the two types of payments are linked, it would cause a massive backlash across the country and even within the Conservative Party if inflation linking was lost on either. As tax rises are going to be tough for Hunt/Sunak to do I really think they are in a tricky spot. Maybe we'll get some sort of time limited suspension? Long term the triple lock could be kept, but the SP age could be raised and benefits further restricted, what we need is "gwroth, gwroth, gwroth". I always though that slogan was so banal as to be meaningless, all modern economies depend on growth (for better or worse), it's how you get that growth that is the tricky thing.

I think they could drop the link to earnings and minimum 2.5% increase (that's the bad new) on the basis that is it unsustainable in the long run, but hey, you still get your 10.1% CPI increase in April - and they would probably get away with that.

They may go with a lower link to earnings this year for work-related benefits, but retain the CPI link for disability benefits.

I can't see them raising income tax given the manifesto commitments upon which they were elected, but they could continue to freeze thresholds dragging more people into taxation through fiscal drag. But it's difficult to see how they can plug a £50bn spending gap. Pension reforms (40% tax relief) could be an option to raise some cash, but I'm not sure they could push that through for April 2023. I think we will be doing well to avoid a recession in the next 12 months, so any growth would be a huge win. Ultimately though, I fear a recession is the only thing that is going to get inflation back under control given the gulf between inflation and BoE interest rates, and an apparent unwillingness to raise them hard and fast.

There has to be something wrong with our system when someone on minimum wage needs tax credits.  Essentially we're subsidising large employers such as Tesco.

westv

marlot said:

bostonerimus said:

NedS said:

bostonerimus said:

My observation is that quite a few people answering have DB pensions, that begs the question of why more without DB's aren't answering...maybe it's too scary to think about, and that SP is a critical part of everyone's plan which makes the Hunt/Sunak Fiscal statement all the more nerve wracking.

I've been thinking about the triple lock, and what it may mean if they were to get rid of it. Which part of the triple lock would be ditched - link to earnings, minimum 2.5% or the link to inflation? I can understand if they may want to ditch either or the first two, but surely the link to inflation has to stay for the long term? They may want to ensure the SP does not continue to grow in real terms, but surely having a SP that will not keep up with inflation would be a big mistake? In a year when inflation is high, if they were to ditch the "triple lock" by ditching the first two, would anyone really care that much (rightly or wrongly) as the only thing anyone is thinking about right now is high inflation.

Dropping the inflation link for SP would make it easier to do the same for benefits, but I think that politically the two types of payments are linked, it would cause a massive backlash across the country and even within the Conservative Party if inflation linking was lost on either. As tax rises are going to be tough for Hunt/Sunak to do I really think they are in a tricky spot. Maybe we'll get some sort of time limited suspension? Long term the triple lock could be kept, but the SP age could be raised and benefits further restricted, what we need is "gwroth, gwroth, gwroth". I always though that slogan was so banal as to be meaningless, all modern economies depend on growth (for better or worse), it's how you get that growth that is the tricky thing.

As someone who had his University tuition paid by the state, I'm astonished that governments have got away with putting an extra 9% on young people's income tax.

Perhaps the fair way out would be to merge income tax and national insurance (and abolish student loan repayments)?  This would mean retired people would essentially pay NI on their pensions.

A hard one to sell though.

How would you have funded the huge increase in people going to university since you did? You don'f thjnk that those that earn more due to a university education should pay more tax?