Pot allocation and management

buyhighselllow

I have DB pension index linked, and a bit over 11 years to SP age. At present we have a pot of around 250K to supplement our expenses. I estimate an average need to withdraw 8-12k per year. Its split currently in Cash Isas 25% S&S( mainly in isa but about 8K in individual shares paying £500 in dividends pa and some individual smaller fund holdings)  25% Cash 30% fixed rate bonds 10% Premium bonds 10% . Currently seem to averaging about 5% growth pa. I want to max out my PB holding so shift that from cash ( so PB to 25%, cash to 15% ). I also want to carry on drip feeding into S&S funds , adding around 8% of my current holding each year for as long as possible, and touch this asset class last. Hopefully in year 1 I won't have to draw the full 12K, ideally half this as I still do some PT work and so does my other half. We have not used our full cash isa allocation yet this year but probably will transfer cash in soon. I may try and get a few more fixed rate savings soon as well.  Its likely we will inherit something equivalent to our pot at some point in the next 5-10 years. Both fully paid into SP. Does this sound sensible in terms of allocation/ management etc ?

Dazed_and_C0nfused

No DC pension?

If you are a basic rate payer now and will be when you take money out (of the DC pot) this has a 6.25% advantage over an ISA.

buyhighselllow

Dazed_and_C0nfused said:

No DC pension?

If you are a basic rate payer now and will be when you take money out (of the DC pot) this has a 6.25% advantage over an ISA.

We have no private pensions if that what you mean ? could you elaborate, I've never managed to get my head around how this may work for us, or if the risk is high ? I am a basic rate payer, with marriage allowance 

Linton

I am not clear on your maths.  It seems that the moment you have £250K.  It would seem that you are 25% shares/funds and 75% cash or close to cash.  That is very cautious and you run the risk of barely covering inflation over the long term.

If this was your only pot and you were withdrawing £12K/year increasing with inflation each year you could well run out of money before you die.  However it seems you are moving over to equity but I dont see what your allocation will be at retirement.  Also there is the doubling of your pot from an inheritance.

So you should be fine, but perhaps you are not making the best use of your money.  This may not matter to you as   with your expected inheritanc you will have a subtantial pot and should be able to lead a comfortable life.  If you are not aiming to leave a large inheritance yourself you could take the view that dying rich is not something you want to aim for.

 Perhaps your inheritance, if it happens, could allow you to retire early.

Brie

You say you have a DB (defined benefit) pension which I would take to mean you have a guaranteed amount of pension you can take each year when you get round to retiring.

But then you talk about what you have invested and how you are going to take it out in chunks which sounds like a DC (defined contribution) pension.  

Or maybe I'm more confused than you are!!

Dazed_and_C0nfused

buyhighselllow said:

Dazed_and_C0nfused said:

No DC pension?

If you are a basic rate payer now and will be when you take money out (of the DC pot) this has a 6.25% advantage over an ISA.

We have no private pensions if that what you mean ? could you elaborate, I've never managed to get my head around how this may work for us, or if the risk is high ? I am a basic rate payer, with marriage allowance 

Say you put £1,000 into an ISA, when you come to take it out its exempt from tax you have £1,000 back.

But put that £1,000 into a personal pension or SIPP and the pension provider will add £250 in basic rate tax relief giving you a fund of £1,250.

When you come to it out 25% (£312.50) will be a TFLS and 75% (£937.50) will be taxable income.  If you pay 20% tax on the taxable element it will be £750 after tax.

£312.50 + £750 = £1,062.50.

Which is 6.25% more than the S+S ISA.

You can usually invest in the same things within a pension and S&S ISA wrapper.

Brie

Ah!  You have a DB pension and a big pot of money!  Now I get it!!!

buyhighselllow

I am taking a DB pension and looking how to manage the savings best to fill the gap up to SP age. We have no dependents so potentially a chunk of equity to use from our house in some way when older as well

buyhighselllow

Brie said:

Ah!  You have a DB pension and a big pot of money!  Now I get it!!!

yes , sorry I didn't make it clearer

Bostonerimus1

Have you done a detailed budget? If you can make the amount you need to drawdown small it take a lot of pressure of your other funds...so how much do you spend? and can you save in some areas. That should be your starting point.

buyhighselllow

Bostonerimus1 said:

Have you done a detailed budget? If you can make the amount you need to drawdown small it take a lot of pressure of your other funds...so how much do you spend? and can you save in some areas. That should be your starting point.

Yes I kept a record of 18 months expenditure prior to taking my pension.