Private pension 25% lump sum options

dunstonh

Assume there is a top 10 of historically best performing funds 

There isn't and that would not be the way it should be done.    

 If you can do this i do often wonder why everyone isnt piling their money into the same ones.?

The fact there isn't is why they are not.

For example, a lot of inexperienced investors have been piling into US equity as that has been the standout performer in this cycle.   However, the decade before it was the worst area.      In that decade, UK mid cap companies were amongst the best.   However, the cycle that followed saw Brexit decimate them.

artyboy

peteyh said:

dunstonh said:

1. if I decide to take a 25% lump sum from my private pension at 55 

Just because you can, doesn't mean you should.
For example, taking the 25% up front like that leaves your retirement planning 25% lower.   Plus, it eliminates the ability to use phased drawdown on that money, which is often the most tax efficient method and provides the most tax free cash over your lifetime.  That is the method we use the most with clients.

So basically your saying i can take smaller sums, as per previous question each year from 55 onward ,tax free? I havent yet taken up a new role - but lets say im earning 35k in the real world ive got a 400k pot in the pension, what can i take and how as an example over time to afford myself lump little sums for luxuries, a car purchase, a nice vacation each year from 55-60? I assume then atleast the money remains in the fund each year with earning potential, ive just taken littler hits over a 5 year period.

It's a Bank of America pension fund so would assume modern flexible as used globally for their workforce. But what questions do i need ask of BOA . How often I can take money from account? Do I need a set an annual request or is it flexible? can i take funds monthly? is there a charge for each transaction? Unsure what i need to ask.

thanks

I guessed that it would be WTW administering it, and a quick google confirmed it. Honestly, these guys seem to have their hooks well and truly into the financial services industry - I've transferred out 2 previous pensions from them, and Mrs Arty has one active one through her bank/employer right now.

As Dunstonh says though, I'd be surprised if it supported anything other than basic fund investments and an annuity option - workplace pension schemes are (IMO) still pretty primitive, probably because they are run at a low cost. And good luck transferring out when the time comes - WTW are a flippin' nightmare with paperwork and risk flags. 

That said, an employer scheme is almost ALWAYS your best option due to contribution matching and often low fees. Whether or not you have a decent range of investment funds - we'll, I found it ironic that despite working for several financial services firms, their pension options were really very limited...

peteyh

Great insight. 

So go do my homework on what pension options they do offer (it's all about WTW yes not BOA) no longer under boa employment so contributions ended. So it's all about finding the best investment vehicle from here on in.

If not suitable to me, then look at what sounds like a hard task of switching out.. But if there aren't long term regularly best performing funds... How to choose a new investment vehicle!?

Sit down with a pension expert? 

peteyh

Is there a risk of pension experts being biased... Ie guiding you to providers they get a better comm. From? 

Sarahspangles

peteyh said:

Is there a risk of pension experts being biased... Ie guiding you to providers they get a better comm. From? 

Yes which is why you choose an IFA not a financial advisor, the I stands for Independent.

dunstonh

peteyh said:

Is there a risk of pension experts being biased... Ie guiding you to providers they get a better comm. From? 

Commission was banned in 2013.    However, the market is segmented between IFAs who are employed by you and FAs who are largely sales reps employed by the company they are tied to or by sub-firms that tie themselves to a particular company.    So, using an FA or sales rep is going to be biased by default.     An IFA shouldn't be as they whole of market and represent you.     However, when it comes to investing, there is a lot of opinion based on selections.

Albermarle

peteyh said:

Great insight. 

So go do my homework on what pension options they do offer (it's all about WTW yes not BOA) no longer under boa employment so contributions ended. So it's all about finding the best investment vehicle from here on in.

If not suitable to me, then look at what sounds like a hard task of switching out.. But if there aren't long term regularly best performing funds... How to choose a new investment vehicle!?

Sit down with a pension expert? 

Finds should be chosen that are appropriate for your age, objectives and risk tolerance.

For example if someone was nervous about investing, the best performing funds long term tend to be at the riskier end and they can be volatile. So maybe even dropping 40% in a year. Would you recommend such a fund to this person ?
Or someone could already have built up a big enough pot and retired. They are more interested in maintaining the value of their pot, than growing it a lot. So again a 'best performing' fund would not be appropriate.

For someone younger and/or willing to take more risk, then usually a simple global tracker, available in nearly all pensions, is recommended.

peteyh

I guess given for that fund i'm looking at utilising in the next 5 years and given all the issues around the globe currently, caution makes sense in that case and min risk option. 
thanks again all!

dunstonh

I guess given for that fund i'm looking at utilising in the next 5 years and given all the issues around the globe currently, caution makes sense in that case and min risk option. 

Not necessarily.   The last 7 years have had lots of issues.  Brexit, Covid, QE ending, Energy mini crisis, inflation spike yet equities have doubled.   Its the "low risk" bonds that have taken the hit.

DeadlyD

@peteyh you may find my thread interesting. I have taken early retirement at 57yrs and transferred out of my workplace pension into a SIPP - https://forums.moneysavingexpert.com/discussion/6506335/new-sipp-are-my-fund-choices-sensible/p1

@dunstonh @Albermarle apologies to hijack the thread slightly but I’ve done a UFPLS for yr23/24 and want to go into drawdown (as been told UFPLS isn’t best option for this due to crystalisation amount won’t be invested (?)) to access £20k of my 25% pot - how do I “get” my tax free allowance £12570 on top of this?