When to start moving workplace pension to other set up ready for decumulation?

RNV

Hello all,

 If I am to retire in 4 years, when should I start setting up a decumulation solution (incl. moving to other provider, fixing the  strategy and funds)?

 The question is in the following context:

1. Just short of 51 y.o., hoping to quit my current job at 55 and start drawing pension
2. Unfortunately a late and slow starter, catching up big time now  - for context last 2 years SalSac  contributions 100k, previous 18 years 140k; aiming to continue the same level of SS contributions (~50k/year for the next 4 years).
3. DC pot only, today’s value ~355k; as for everybody else no growth other than contributions over the last 1.5 years – hopefully lots of "cheap"(er) units I bought instead; 
4. Will have full SP (with 3 years to buy if stop at 55)
5. Currently with workplace Scottish Widows and have to keep it for SalSac reasons –  in 2 funds [ 85% in Mixed Asset SW Portfolio 2 (~80% equity); 15% in SW SSgA 50:50 Global Equity Index]
6. No other notable savings (for tax efficiency, have been subsidising sal sac contributions last 2 years out of relatively low savings I had)
7. So, I will have 13 years until SP kicks in,  fully funded from the above modest DC. Looking for 25k gross in today’s money [I know this is tight];   then from 68 y.o.  10k less replaced by  SP. This will not be the only income in the household, ~30% share
8. Believe some kind of  “bucketing” set up I will have to come up with  - 1) for the first 13 years and 2) thereafter.  Any other better suited options for my case?

 When do I need to actually start setting up decumulation solution (rather than reading about it)?  Am I late with this stage as well as I was with accumulation ?

Your thoughts are greatly appreciated.

Linton

Firstly you need to determine your decumulation strategy.  This is getting urgent.

The danger you face is that between now and 4 years time there is a significant crash which messes up your retirement plans. Unless of course your action in the case of a major crash would be to delay retirement until it was over what you do about it should be answered by your decumulation plans since they should state what you do in the event of a crtash occuring during retirement.
.  
For example my decumulation strategy requires 5 years income in cash and 5 years in low risk investments. The rest is invested in 100% equity. Therefore logically 4 years before retirement I would need 1 year in cash and 5 years in low risk investments to cover the first 6 years in retiement. 1 year in cash would be added every year from now to retirement.

RNV

Thanks Linton

An absolute lack of cash is my problem I know that. However, starting saving cash now  (at the expense of SalSac) will be very tax inefficient as I will be in 40% bracket. So, I'm trying/hoping  to "save" this "cash" in the pension -  my cash buffer will have to come from 25% tax free.  Not for 5 years (I understand I cannot afford taking so much out of the pot of this size from day one) but may be for 1-2 years initially.

If 4 years from now will find me in a dip market crash, I will have to delay and stay in my hated but relatively well paid job . If it happens say 6 -10 years from now (after//if I have pulled the trigger and resigned)  it will be a bigger deal, I suppose. I need to convince myself that I can realistically plan for that scenario.

In the very short term, I'm thinking of going va banque.   This financial  year is my last year when some CF is still available, I will be close to the new limit of 60k with my current contribution level (100 % bonus just went in as well). I'm thinking of applying for a new 0% purchase credit card and supplement some further SalSac contributions this year.  I've no debts (other than joint mortgage for 2 remaining years), so should manage CC repayments over the 2nd year still at 0%. 

Pat38493

Everyone has a different tolerance for risk and different priorities - many would not keep 5 years in cash and would think that a couple of years or even less is plenty.  I am thinking of possibly stopping work in the in the next 1-3 years and my pots are all invested still in 80/20 funds.  If you have the flexibility to retire a bit later if needed, that should be ok.  Also if you have the flexibility to reduce your spending or defer some spending for a couple of years that helps as well.

Even when I start taking money out, I doubt that I will keep 5 years in cash.  Probably 6-12 months, but I have some DB assets so I guess it's easier for me to do that.

Also - not sure how you keep 5 years in cash if you don't know what inflation is going to be over the next 5 years - you would have to keep more than 5 years in real terms to cover 5 years of spending with inflation.

Money in cash carries its own risk - what if inflation stays above 5% for the next 5 years?

Also you are probably aware of this, but you can probably set up your pension fund to keep future contributions in cash or put them in a cash like fund like a money market fund.

dunstonh

 If I am to retire in 4 years, when should I start setting up a decumulation solution (incl. moving to other provider, fixing the  strategy and funds)?

With the current workplace scheme, you wont be able to move fully until after the final employer contributions are made.

1. Believe some kind of  “bucketing” set up I will have to come up with  - 1) for the first 13 years and 2) thereafter.  Any other better suited options for my case?

You would probably split it more than that.  2-3 years in cash, 3-5 years in a short term spread and 5-15 years in medium term and 16+ long term.  (variances of that are commonplace as there are multiple strategies).

So, maybe you adjust the funds with the existing provider to suit the plan but dont move it until after you leave.