Pension Pot Drawdown Or Not?

Albermarle

eric4395 said:

dunstonh said:

1 is grade rated as cautious which I would have thought is appropriate in my situation . The only other one cautious is RL governed  portfolio 2.

Apologies, I was mixing it up with another GP number.  I dislike RL's numbering system.
However, it is still worth a look the picture holistically and not on a per product basis.

£300k cash
£50k in high risk equities
Penson of £525k with 61% equities.
That is £875,000 of which £370,250 is equities.
Does that mix of assets reflect the way you are going to spend the money?

Apologies you have lost me here 
What is the 300,000 cash got to do with my pension as they are savings
What is the 50k in high risk equities?
We have approx 50k in shares  in Tesco, Shell etc?
 What is the figure of £875,000 based on  ?
Are you saying 61% of £525,000 in equities is to high even although it's rated as a cautious fund,
Is there an alternative in RL  governed portfolio's 1- 9 ?
 And unsure what mix of assets reflect the way I am going to spend the money  means?.

You should look at your financial assets in the round and not individually as pension, savings etc.

Dunstonh did a very rough assessment of your asset allocation across the board.

So you have 
£300K in cash - risk of losing value to inflation
£50k in individual company shares, so high risk
Around £310 K in a diverse range of equities in your RL pension, so medium /high risk
Around £215 K in a diverse range of government and corporate bonds, and smaller amounts of other investments ( as part of the non equity part of the RL pension pot) so medium/low risk

So overall 41% equities, which is at the lower end of what is usually recommended.

In simple terms with that much in cash, you can afford to take a bit more risk by upping your % equities and still have a reasonably cautious portfolio but with more potential to grow long term. This will help to counter the inflation risk from holding a lot of cash.

Or to make it even simpler, just buying more equity with say £50K of the savings would rebalance the %'s.

jamesd

The inheritance tax implications of gifting for the recipient can be addressed by a term life insurance policy on the life of the gifter with the recipient as beneficiary.

If there's value to gifting, just do it early and perhaps provide for the possible inheritance tax bill.

Do keep good and accessible records so whoever is managing the estate doesn't have to do lots of digging to try to find out what happened six-seven years ago.

eric4395

Albermarle said:

eric4395 said:

dunstonh said:

1 is grade rated as cautious which I would have thought is appropriate in my situation . The only other one cautious is RL governed  portfolio 2.

Apologies, I was mixing it up with another GP number.  I dislike RL's numbering system.
However, it is still worth a look the picture holistically and not on a per product basis.

£300k cash
£50k in high risk equities
Penson of £525k with 61% equities.
That is £875,000 of which £370,250 is equities.
Does that mix of assets reflect the way you are going to spend the money?

Apologies you have lost me here 
What is the 300,000 cash got to do with my pension as they are savings
What is the 50k in high risk equities?
We have approx 50k in shares  in Tesco, Shell etc?
 What is the figure of £875,000 based on  ?
Are you saying 61% of £525,000 in equities is to high even although it's rated as a cautious fund,
Is there an alternative in RL  governed portfolio's 1- 9 ?
 And unsure what mix of assets reflect the way I am going to spend the money  means?.

You should look at your financial assets in the round and not individually as pension, savings etc.

Dunstonh did a very rough assessment of your asset allocation across the board.

So you have 
£300K in cash - risk of losing value to inflation
£50k in individual company shares, so high risk
Around £310 K in a diverse range of equities in your RL pension, so medium /high risk
Around £215 K in a diverse range of government and corporate bonds, and smaller amounts of other investments ( as part of the non equity part of the RL pension pot) so medium/low risk

So overall 41% equities, which is at the lower end of what is usually recommended.

In simple terms with that much in cash, you can afford to take a bit more risk by upping your % equities and still have a reasonably cautious portfolio but with more potential to grow long term. This will help to counter the inflation risk from holding a lot of cash.

Or to make it even simpler, just buying more equity with say £50K of the savings would rebalance the %'s.

The £300,000 is tied up in an easy access account and also  easy access &  fixed rate ISA 's  with availability to access this year, 2025 and 2026. I will access and use as need be and reinvest  what I don't need. The interest rates are all round 5% so for the time being I'm not losing out to much to inflation.
  
The shares ie Tesco being  the main one worth about £40,000+ if we cashed them in have grew a fair bit over the years compared to when they first started( my wife's ) they also send you bonus shares every year etc so always adding to the total and can't complain about them, they have returned way more than was invested.
Shell/Royal Dutch /National grid /British gas shares were freebies if I remember correctly and are now worth a few thousand  £ so can't really complain about them either. Might start to look at selling them  and  reinvest in more isas, we haven't used our £20,000 for this year.
Interesting to read about the equity % figure and what you would maybe do as obviously at my age you are normally not wanting to take to much of a risk and stabilise what you have but if I am maybe not going to touch my pension then that changes things a bit. 

maxmycardagain

taxation, the double edged sword hanging over pensions no one warned us about....

20% will go in a heartbeat, did you pay into a pension with a view to leaving it to family or living well till you peg it?

not all villians wear a mask...

jamesd

eric4395 said.

Interesting to read about the equity % figure and what you would maybe do as obviously at my age you are normally not wanting to take to much of a risk and stabilise what you have but if I am maybe not going to touch my pension then that changes things a bit. 

Yes, worth thinking about. Old recommendations usually expected spending most of the money as an annuity.

For those taking a regular drawdown income the highest safe withdrawal rate tends to be 60-65% equities and 40-35% bonds, depending on drawdown policy and such.

That doesn't take account of your risk tolerance and just how much drop you can handle without losing sleep.

Bonds (cash included) are pretty stable so you might try to work out your maximum drawing during an equity downturn and keep that much in bonds. I doubt it'll be more than 20% so you might go 80:20. You'd rebalance about once a year to protect some of the gain from equity bull markets.

You could also consider 10% each in global smaller companies and emerging markets funds as part of the equities. Those are likely to grow a few percent faster but see a drop of perhaps 80% in a bad year.

MallyGirl

Capital gains thresholds have been lowered significantly so if you are going to sell some shares you should spread the activity out to avoid as much tax as possible - unless they are held in ISAs of course 

jamesd

That's one nice thing about tracker funds outside a tax shelter. You can bed and breakfast to use the CGT allowance just by switching some of the money into another brand of the same thing.

Bostonerimus1

maxmycardagain said:

taxation, the double edged sword hanging over pensions no one warned us about....

20% will go in a heartbeat, did you pay into a pension with a view to leaving it to family or living well till you peg it?

not all villians wear a mask...

Everyone was told about the income tax benefits and tax free growth. If you think a pension is a bad deal then do something different to fund your retirement. Personally, I love them.

eric4395

Just as a matter of interest how does it work regarding tax after you have took all your tax free sum from your pension pot. If you were to take as an example £20,000 from your remaining pot and your only other income was the gov pension which was less than £12,570 pa. Would you just simply  be taxed in the lower tax bracket  ie 20/21 % 
I read something about HMRC providing emergency tax codes and having to claim back tax etc. it sounded a right muddle to me?

MallyGirl

you have it right - you would be liable for basic rate tax on the amount above the £12,750 but you may be charged emergency tax to begin with.