Which pension first ?

Albermarle

The DC pot is split between two active modern large multinational’s pension schemes.  I don’t intend actively managing them as investments myself (been bitten before), so can the pot be left in those pensions once I’m retired and can I draw down from them or does the money need to be put else where to allow draw down ?

I do not really understand what you mean . When you say large multinationals, do you mean current/ex employers?

Presumably the actual DC pension schemes are managed by a pensions provider, like Aviva, Scottish Widows or one of many others?

Although you do not seem keen on managing the investments in the pension yourself, be aware that in a normal DC scheme, it is ultimately your responsibility ( unless you have a financial advisor). If you do not do anything, you are probably in a default investment.  

Dazed_and_C0nfused

Albermarle said:

Kelvin_Hall said:

Dazed_and_C0nfused said:

At face value it seems unnecessary to take an actuarially reduced DB pension of you can fund the next 5 years from a mix of the smaller DB pension and DC pot.

How much of a reduction is it for taking it 5 years early?

Thanks Dazed, a couple of years ago I got a quote for taking the larger DB pension at 60 and 67.  At that time it was £6650 at 60 and £11000 at 67.

If both figures are in todays money , then that is a bigger than normal reduction.
Maybe the £11,000 includes some kind of estimation of inflation over the 7 years, so you are not really comparing like for like.

Would agree with @Albermarle there, that's a pretty large reduction so worth getting upto date figures before considering it further.

Kelvin_Hall

Albermarle said:

The DC pot is split between two active modern large multinational’s pension schemes.  I don’t intend actively managing them as investments myself (been bitten before), so can the pot be left in those pensions once I’m retired and can I draw down from them or does the money need to be put else where to allow draw down ?

I do not really understand what you mean . When you say large multinationals, do you mean current/ex employers?

Presumably the actual DC pension schemes are managed by a pensions provider, like Aviva, Scottish Widows or one of many others?

Although you do not seem keen on managing the investments in the pension yourself, be aware that in a normal DC scheme, it is ultimately your responsibility ( unless you have a financial advisor). If you do not do anything, you are probably in a default investment.  

You are absolutely correct, current employers plans administered by L&G (two because the company separated a few years ago, so my current ongoing pension is with the company I’m with now, the other with the parent company).

I’m in schemes that are suitable for drawdown once I retire but I have no idea wether they will be good investments after retirement 🤷‍♂️

Albermarle

I’m in schemes that are suitable for drawdown once I retire but I have no idea wether they will be good investments after retirement 🤷‍♂️

Drawdown is just a process of withdrawing money from a pension, usually over a long period. There are some strategies for utilising the tax free part and the taxable part to minimise tax paid

Also clearly over 30 years or more, how the investments in the pension perform, will impact on how much you can withdraw/how long the money will last.

You may want to consider taking some time to study the subject a bit more, or maybe consider taking some professional financial advice.

Kelvin_Hall

Albermarle said:

I’m in schemes that are suitable for drawdown once I retire but I have no idea wether they will be good investments after retirement 🤷‍♂️

Drawdown is just a process of withdrawing money from a pension, usually over a long period. There are some strategies for utilising the tax free part and the taxable part to minimise tax paid

Also clearly over 30 years or more, how the investments in the pension perform, will impact on how much you can withdraw/how long the money will last.

You may want to consider taking some time to study the subject a bit more, or maybe consider taking some professional financial advice.

Yes, I’m thinking my situation may be complex enough to justify professional advice.

Thanks for all the help and advice 👍

L9XSS

arnoldy said:

Also look at rises from the DB pensions when in payment. Most people don't realise that the vast majority of (non public sector) DBs are NOT index linked. They are almost always capped and rises are based on a blended composite rate capped at 0%, 2.5% and 5% within various parts of the DB depending on when accrued.

Also be aware that deferred DBs have better inflation protection than those in payment, could be important in todays high inflation times. This is controlled by pension revaluation orders and you will find you pension changes quite a lot each January, and on the anniversary of when the pension was put into deferment. 

As other have said the reduction for taking early is important, if it is 3% pa or less it could very well be worth you taking the DBs early.

For example NRA 65, 3%pa reduction, anticipated age of death 83 (national average)

at 60 you get 23 years at 0.85 of full pension = 23*0.85 =19.55
at 65 you get 18 years at 1.00 of full pension = 18*1.00 = 18.00 = less!!

There is a sweet spot in taking a DB, depending on the reduction pa, but often it is around 58-60.

Ultimately, primarily because of inflation,  I would in your situation wait till the deferred pensions are revalued in November/December this year and look at what you get with a view to taking next year, possibly on anniversaries of deferment.

Use pension Lump sum to tide you over from DC if necessary.

These are just my thoughts and ideas, not advice, I have an interest in the area but am not qualified or professional. Good luck.

Pretty concise answer. As I have a DB pension in deferment this year s very useful information.

WYSPECIAL

arnoldy said:

Also look at rises from the DB pensions when in payment. Most people don't realise that the vast majority of (non public sector) DBs are NOT index linked. They are almost always capped and rises are based on a blended composite rate capped at 0%, 2.5% and 5% within various parts of the DB depending on when accrued.

Also be aware that deferred DBs have better inflation protection than those in payment, could be important in todays high inflation times. This is controlled by pension revaluation orders and you will find you pension changes quite a lot each January, and on the anniversary of when the pension was put into deferment. 

As other have said the reduction for taking early is important, if it is 3% pa or less it could very well be worth you taking the DBs early.

For example NRA 65, 3%pa reduction, anticipated age of death 83 (national average)

at 60 you get 23 years at 0.85 of full pension = 23*0.85 =19.55
at 65 you get 18 years at 1.00 of full pension = 18*1.00 = 18.00 = less!!

There is a sweet spot in taking a DB, depending on the reduction pa, but often it is around 58-60.

Ultimately, primarily because of inflation,  I would in your situation wait till the deferred pensions are revalued in November/December this year and look at what you get with a view to taking next year, possibly on anniversaries of deferment.

Use pension Lump sum to tide you over from DC if necessary.

These are just my thoughts and ideas, not advice, I have an interest in the area but am not qualified or professional. Good luck.

That’s what’s I did when I wanted to choose which pension I wanted to access first DB or DC. I looked at the total amounts I might get from the DB by taking a smaller figure early or  waiting. I also looks down at the total guaranteed income I would likely need once fully retired. Once I realise  the reduced, taken early, DB plus full state pension was enough I took the DB first.

It also meant that it didn’t restrict me to the then £4K limit to continue paying in to the DC pots while still working and building savings.

Albermarle

Kelvin_Hall said:

Albermarle said:

I’m in schemes that are suitable for drawdown once I retire but I have no idea wether they will be good investments after retirement 🤷‍♂️

Drawdown is just a process of withdrawing money from a pension, usually over a long period. There are some strategies for utilising the tax free part and the taxable part to minimise tax paid

Also clearly over 30 years or more, how the investments in the pension perform, will impact on how much you can withdraw/how long the money will last.

You may want to consider taking some time to study the subject a bit more, or maybe consider taking some professional financial advice.

Yes, I’m thinking my situation may be complex enough to justify professional advice.

Thanks for all the help and advice 👍

If you do take advice it is usually recommended to find a local Independent Financial Advisor, and not go to your bank/building society/large national firm.
Typically they will charge you around 2 or 3% of your funds as an initial set up charge, and around 0.75% as an ongoing charge, although the latter is not compulsory. Normally they will offer a free introductory chat.