The practicalities of commencing drawdown from MP pension pots

Heidiho

Good day! Im 50 and hoping to dip my toe into retirement waters in the next 18 months or so. My plan requires me to use some of my MP pension pots to fund myself from the age of 57 until the SP kicks in at 67. I have 4 MP pension pots of varying values, all of which are with Aviva. One is from a previous employer and there are 3 for my current one (not my choice, although I’m sure there’s a reason for it!).

I’m interested to hear peoples experiences of when they initiated their own draw-downs. How long before needing the funds did you start the ball rolling (and was this enough)? If you had multiple pots how did you decide which one to draw down from first? And are there any other things that need to be considered before taking the plunge?

NoMore

What's MP mean in this context ? There's lots of acronyms around pensions, but this is a new one to me.

Dazed_and_C0nfused

Money purchase probably.  

I think 7 years is more than enough time to start the ball rolling!

Heidiho

NoMore said:

What's MP mean in this context ? There's lots of acronyms around pensions, but this is a new one to me.

Apologies! It’s Money Purchase.

dunstonh

 How long before needing the funds did you start the ball rolling (and was this enough)?

Will you be transferring the pensions to a modern plan with full functionality or do the plans you already hold have the required functionality?  If multiple plans are being drawn on, are you ok with mixed tax codes?

If you had multiple pots how did you decide which one to draw down from first?

I don't in most cases. Around 9 in 10 case are best consolidating.  Plus, its a lot easier.  If there are safeguarded benefits or contractual reasons to keep them, then that if fine but if not, then consolidating may well be better.

Heidiho

dunstonh said:

 How long before needing the funds did you start the ball rolling (and was this enough)?

Will you be transferring the pensions to a modern plan with full functionality or do the plans you already hold have the required functionality?  If multiple plans are being drawn on, are you ok with mixed tax codes?

If you had multiple pots how did you decide which one to draw down from first?

I don't in most cases. Around 9 in 10 case are best consolidating.  Plus, it’s a lot easier.  If there are safeguarded benefits or contractual reasons to keep them, then that if fine but if not, then consolidating may well be better.

Thank you very much for this. I don’t know the answers to the first two questions unfortunately. I think I just assumed that I’d be drawing down from the same pots that I’ve been paying into, but it’s obviously not necessarily as straightforward as that. At least I have plenty of time to look into this though

regarding the multiple pots, I’ll look into consolidating these nearer the time. I do remember asking my employer to do this for me a while back but I think they said it wasn’t possible because one of the pots is salary-sacrifice and the others aren’t (or maybe it was the other way round). I’m really not sure though - I know there’s one pot for my regular contributions, one for AVCs and another for one-off bonus payments but that’s it.

Brie

Many firms won't give you much proper info more than 6 months before you can access the funds.  And how good they are at then acting on your advice very much depends on the actual team administrating.  I've got 3 different occupational pensions with the same company of administrators and get different service from each.  The worst of the bunch takes up to 3 months to get a response as they insist on sending things by email and encrypted which I can't open.  I keep telling them to send by post but that usually takes 3 tries before something arrives.

squirrelpie

It sounds like your first priority is to educate yourself about the world of pensions in general, and the four schemes you have in particular. Make sure you have the scheme booklets and annual statements and any other paperwork they refer to. Read all the bumf and try to understand it (you can ask here if you don't understand). Then you will know what is possible with each of your pots, and how much each of them costs you per year.

Then you can decide whether to consolidate elsewhere either to improve access or reduce costs. You probably can't do much with the three associated with your present employer in terms of moving them elsewhere, although you might perhaps be able to transfer some previous payments out depending on the scheme rules. You might also want to ensure that your pensions are invested in sensible investments given your future plans. Many plans are automatically 'lifestyled' on the assumption that you will buy an annuity.

You will probably have to wait until much nearer your target age before you can do much more, as already mentioned.

xylophone

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Regarding your Money Purchase pensions, do any of them have safeguarded benefits (Guaranteed Annuity Rate)?

 If not, Is there any reason why the pension from the previous employer should not be transferred into the Aviva plan holding the regular

contributions?

It seems that you are intending to  continue to work for your current employer and retire at age 57?

Presumably as you approach retirement, you could consider consolidating the (then ) three plans into one plan offering whatever flexibility

you require?

enthusiasticsaver

My husband and I retired early at age 58. Initially for the first 2 years we lived off my husbands and my  lump sum from our DB schemes. We only started drawing on the DC pots and stocks and shares ISAS 5 years later. Our state pensions for both of us kick in this year and next year. Our IFA worked out a drawdown scheme for us so we are mainly following that. We had been working out estimated income and expenditure since our mid 50s expecting to retire at 60. We decided to go early when we thought we could afford to retire without compromising lifestyle. We got quotes 6 months before retiring but we had been using annual statements and forecasts to get rough estimates for several years prior to that. 

Personally if none of these MP schemes have protected benefits I would consolidate them. Not sure why you have three different pots with your current employer but some might have guaranteed benefits. You need to work out how much you need to live off initially before you can work out when you can afford to retire. What is the plan to fund you in the early years of retirement before your pensions can be drawn on?  

xylophone

Not sure why you have three different pots with your current employer 

OP said

I know there’s one pot for my regular contributions, one for AVCs and another for one-off bonus payments but that’s it.

Presumably this was the employer's choice when setting up the pension arrangements with Aviva - keeping auto enrolment

contributions separate perhaps?