About to draw on private pension - advice please

Shirl62

Hi Everyone -  A little background about me.  I am 60 and don't anticipate working again.  I took voluntary redundancy a few years ago and am wanting to start claiming my pension.  I have a fully paid up state pension and a few private arrangements.  I am currently being paid an annuity of 205 per month from one old job which will not increase.  I also have an SIPP pension with Aegon worth 146600 and another with Legal and General which is paid up and the value on that is £280000.

I am not sure how complex it is to access my own pension.  My plan is just to draw 12k per annum in total to stay within the personal tax threshold.  My husband has a good pension and we have other funds.  I was recommended Fairstone who did a review for me.  Their costs are an initial cost of 1.5% then an ongoing annual charge of 1.59% which covers their adviser charge, a fund charge for the fund they recommended and a platform charge.  This seems expensive to me but I am new to all this.  Obviously I want my fund to be managed well and if these are the costs necessary so be it.  

There seem to be a lot of knowledgeable people on this board so I thought I would put this out there and ask for any thoughts.

Thanks in advance.

Albermarle

 I also have an SIPP pension with Aegon worth 146600 and another with Legal and General which is paid up and the value on that is £280000.

Can you explain why you say the L&G one is 'paid up' but you do not describe the Aegon one as such. ( just trying to be clear on what type of pension it is ) 

The Fairstone charges are a bit on the high side. The initial cost of 1.5% is OK, but the ongoing charge could be lower.

I am not sure how complex it is to access my own pension.
As long as the pension provider offers drawdown options, then it is not difficult. Some older pensions may not be very flexible and may have to be transferred ( also relatively simple nowadays). The more tricky bit is deciding how the funds should be invested, although often people keep the same investments for drawdown as they had before drawdown.

 My plan is just to draw 12k per annum in total to stay within the personal tax threshold. 
You can take 25% of the pot tax free. Either all in go or in stages ( if the provider has this facility) So many people take a payment that includes a taxable amount and a tax free amount . So you could take more than £12K but you would have to take the £205 per month into account from the other paying pension.

You can have a free pension consultation with Pension Wise, for general guidance about options.
Pension Wise: free pension guidance | MoneyHelper

The Moneyhelper site has info on drawdown and you will probably find useful info on your pension providers website.
Pensions and retirement | Help with pensions and retirement | MoneyHelper

NannaH

Have you already got a year or two’s planned income in cash within one or both pensions or do you have to sell investment funds to aquire it?  Are you in accumulation or income funds ( they pay regular income dividends) .
If you don’t want to manage your own drawdown then an IFA’s advice would seem prudent.  The fees you mention sound expensive to me.
Would you take a tax free 25% lump sum or use UFPLS? 

Linton

Accessing drawdown is straight forward assuming your pension provider supports it.  If not you will have to move your pension elsewhere. You just fill in a form probably available on the provider’s website and you get your cash transferred to your linked bank account at some time in the near future.

There are two complications.  Firstly you will have to sell sufficient investments to have the cash ready for when the provider wants to pay you. So you have to decide what to sell.  More broadly you have to decide how much and how often you wish to drawdown, which can be a complex problem if your drawdown is to be sustainable in the long term.

I do not see any requirement for an IFA to implement the mechanics. Rather their role would be to help you with the broader issues like appropriate investments, sustainability, tax, and possibly inheritance planning.

Marcon

Shirl62 said:

Hi Everyone -  A little background about me.  I am 60 and don't anticipate working again.  I took voluntary redundancy a few years ago and am wanting to start claiming my pension.  I have a fully paid up state pension and a few private arrangements.  I am currently being paid an annuity of 205 per month from one old job which will not increase.  I also have an SIPP pension with Aegon worth 146600 and another with Legal and General which is paid up and the value on that is £280000.

I am not sure how complex it is to access my own pension.  My plan is just to draw 12k per annum in total to stay within the personal tax threshold.  My husband has a good pension and we have other funds.  I was recommended Fairstone who did a review for me.  Their costs are an initial cost of 1.5% then an ongoing annual charge of 1.59% which covers their adviser charge, a fund charge for the fund they recommended and a platform charge.  This seems expensive to me but I am new to all this.  Obviously I want my fund to be managed well and if these are the costs necessary so be it.  

There seem to be a lot of knowledgeable people on this board so I thought I would put this out there and ask for any thoughts.

Thanks in advance.

A free appointment with PensionWise would give you a chance to talk through your options/the mechanics of what you would like to do. They can't give advice (any more than anyone on this board can), but often all you need is clear, accurate information you enable you to take an informed decision.

Link: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw#

Shirl62

Albermarle said:

 I also have an SIPP pension with Aegon worth 146600 and another with Legal and General which is paid up and the value on that is £280000.

Can you explain why you say the L&G one is 'paid up' but you do not describe the Aegon one as such. ( just trying to be clear on what type of pension it is ) 

The Fairstone charges are a bit on the high side. The initial cost of 1.5% is OK, but the ongoing charge could be lower.

I am not sure how complex it is to access my own pension.
As long as the pension provider offers drawdown options, then it is not difficult. Some older pensions may not be very flexible and may have to be transferred ( also relatively simple nowadays). The more tricky bit is deciding how the funds should be invested, although often people keep the same investments for drawdown as they had before drawdown.

 My plan is just to draw 12k per annum in total to stay within the personal tax threshold. 
You can take 25% of the pot tax free. Either all in go or in stages ( if the provider has this facility) So many people take a payment that includes a taxable amount and a tax free amount . So you could take more than £12K but you would have to take the £205 per month into account from the other paying pension.

You can have a free pension consultation with Pension Wise, for general guidance about options.
Pension Wise: free pension guidance | MoneyHelper

The Moneyhelper site has info on drawdown and you will probably find useful info on your pension providers website.
Pensions and retirement | Help with pensions and retirement | MoneyHelper

Hi Albermarle - thank you for replying and sorry for the delay in my response.   On the report I have from Fairstone both my L&G and Aegon ones are categorised as paid up.  The Aegon one is Aegon One Retirement SIPP - this is invested in 
AEGON MI Savings (L) (ARC).   Hope this clarifies that for you.  Appreciate your other comments.  

Shirl62

Linton said:

Accessing drawdown is straight forward assuming your pension provider supports it.  If not you will have to move your pension elsewhere. You just fill in a form probably available on the provider’s website and you get your cash transferred to your linked bank account at some time in the near future.

There are two complications.  Firstly you will have to sell sufficient investments to have the cash ready for when the provider wants to pay you. So you have to decide what to sell.  More broadly you have to decide how much and how often you wish to drawdown, which can be a complex problem if your drawdown is to be sustainable in the long term.

I do not see any requirement for an IFA to implement the mechanics. Rather their role would be to help you with the broader issues like appropriate investments, sustainability, tax, and possibly inheritance planning.

Thank you Linton.  I will definitely use a IFA to assist with investments.  I don't have the confidence to do this myself.  

Shirl62

NannaH said:

Have you already got a year or two’s planned income in cash within one or both pensions or do you have to sell investment funds to aquire it?  Are you in accumulation or income funds ( they pay regular income dividends) .
If you don’t want to manage your own drawdown then an IFA’s advice would seem prudent.  The fees you mention sound expensive to me.
Would you take a tax free 25% lump sum or use UFPLS? 

Thanks Nanna H appreciate the reply -   I have separate funds from savings that would give me the income I need but as I am not using my personal tax allowance I thought it would be worthwhile to draw some income from my pension now.  I would go down the UFPLS route.  

bostonerimus

You'll be withdrawing 2.8% which is a sustainable amount, but your advisor and fund fees will be 1.59% taking your annual drawdown to 4.39% which is a little too much IMO. So yes your fees are high. Have you asked yourself why or if you need Fairstone or an advisor? You have a simple situation and a little bit of research would get you all the knowledge you need.

dunstonh

The 1.59% will be the platform charge, the fund OCF & TC and the adviser charge.   Most DIY investors don't take any notice of the TC as its artificial. It exists but it is ignored.  However, IFAs are required to disclose to TC.    1.59% would suggest a portfolio that includes managed funds and is right in the ballpark of what you would expect if that is the case.   The fees are not high.

JohnWinder

I wonder if 1.59% is high because it suggests ‘managed funds’. If it were low it would suggest low cost tracker funds, but it doesn’t suggest that, so I’m guessing it’s more high than low.