SW - Pathway 1 - Leave Invested

Kinclad

Hi, i have probably been slightly naive in my decision making, so hoping i can get some advice.

Having reached 55, i have drawn a small % (3.9% of the 25%) of my tax free cash from my group pension scheme with Scottish Widows.

The Crystallized amount has gone into a fund called - Pathway 1 - Leave Invested. Looking at this fund, its returning only 1.85% over the last 3 years (with 2022 being a year where it nosedived, im presuming due to the mini budget), which is of a concern to me.

Although maybe my concern regarding the previous growth should be less of a concern due the (what is generally perceived) as that 1 in 100 years incident in 2022?

And im not sure what freedom i have of even moving that money now its Crystallized to another SW fund.

Any thoughts would be appreciated.

Thanks,

Mark.

dunstonh

The Crystallized amount has gone into a fund called - Pathway 1 - Leave Invested. Looking at this fund, its returning only 1.85% over the last 3 years (with 2022 being a year where it nosedived, im presuming due to the mini budget), which is of a concern to me.

Gilts had their worst period in over 100 years and whilst Liz Truss is the goto blame person for everything, gilts started falling from November 2021 (before she was in power) and continued until their low point in October 2023 (a year after she was out of power).   Global bonds have been hit too and Liz Truss doesn't have that influence.  UK was the worst at that time but others have started to show similar (e.g. France).   You cannot have 13 years of quantitative easing and expect to come out of that unscathed.     Effectively, 2021-2023 was bonds resetting themselves back to norm after the credit crunch.   (very simplified answer).

The problem is that the SW pathways range, like many pathways, is very limited in choice and not that desirable unless you don't know what you are doing. It prevents bad mistakes, but it's not high-quality.  

For example, pathway one 3 year performance is 1.85%.  Yet others with 50% equities using underlying passives (pathway 1 is 54% equities and underlying passives) returned 9.40% in the same period.    Past performance is not a guide to the future but if you have funds with similar equity ratios using passives then the differences are not normally that great.  

And im not sure what freedom i have of even moving that money now its Crystallized to another SW fund.

Yes you can.

Albermarle

The SW pathway 1 will be the default fund if you make no active choice of fund.

To try and simplify choices for inexperienced investors going into drawdown, there was an agreement that providers will offer four simple pathways. The choice depending on the customers future objectives. 

I am pretty sure that you can change it to another pathway, or one or more on the other funds on offer in your SW pension.

Overall the last decade was a boom time for investments of all kinds. This decade started with Covid, then the Ukraine war supercharged energy prices and then increasing interest rates have badly affected bonds/gilt prices.

If I look at a standard medium risk Multi asset fund with 50 % equity content( which I am assuming that SW pathway is something similar) then it has gone up 2.5% in the previous 36 months. If you measure it from the start of 2022 it is 1.5% .

Kinclad

If im understanding this correctly, it does not look like i have any investment alternatives with regards to the Crystallized pot

Albermarle

Normally there should be other funds available not related to the Pathways.
I do not think the four pathways will be the only alternatives. They are just there as a kind of default for the majority of people who have no idea what they are doing/what to choose.

Nick9967

You have lots of choice, so when i moved mine around with SW early last year (and took a lot of guidance, learning etc from these pages ) moved into drawdown and took some Tax free it was fairly easy , all on the phone i might add.
They create 2 accounts Retirement planning for your pot and Retirement income for your crystalized (remains invested but now taxable of course)

and to give you some sort of idea (don't follow mine its specific to what i chose but does show some of the choices you have)

essentially i can move either account to whatever fund choice i want , even down to individual ones i believe as there is a huge list.

I've been through it so if you want any info i have lots of files on the funds etc (PDF's) i can share

Retirement Planning	% of RP Pot
Portfolio 3	79.7%
Portfolio 4	19.2%
Retirement Income	% of RI Pot
Portfolio 3	10.2%
Portfolio 4	2.5%
Portfolio A	86.3%
	UK Equities	Overseas Equities	ESG Equities	UK Corporate bonds	Global Corporate Bonds	Emerging Bonds	Real estate	Cash
Portfolio 3	13.2%	46.2%	6.6%	8.4%	12.6%	6.0%	5.0%	2.0%
Portfolio 4	7.0%	24.5%	3.5%	23.9%	31.6%	3.0%	4.0%	2.5%
	Bonds	Equities	Near Cash
Portfolio A	38.5%	59.5%	2.0%
		Annual
	Investment Fee	0.1%
	Administration Fee	0.3%

Kinclad

Nick9967 said:

You have lots of choice, so when i moved mine around with SW early last year (and took a lot of guidance, learning etc from these pages ) moved into drawdown and took some Tax free it was fairly easy , all on the phone i might add.
They create 2 accounts Retirement planning for your pot and Retirement income for your crystalized (remains invested but now taxable of course)

and to give you some sort of idea (don't follow mine its specific to what i chose but does show some of the choices you have)

essentially i can move either account to whatever fund choice i want , even down to individual ones i believe as there is a huge list.

I've been through it so if you want any info i have lots of files on the funds etc (PDF's) i can share

Retirement Planning	% of RP Pot
Portfolio 3	79.7%
Portfolio 4	19.2%
Retirement Income	% of RI Pot
Portfolio 3	10.2%
Portfolio 4	2.5%
Portfolio A	86.3%
	UK Equities	Overseas Equities	ESG Equities	UK Corporate bonds	Global Corporate Bonds	Emerging Bonds	Real estate	Cash
Portfolio 3	13.2%	46.2%	6.6%	8.4%	12.6%	6.0%	5.0%	2.0%
Portfolio 4	7.0%	24.5%	3.5%	23.9%	31.6%	3.0%	4.0%	2.5%
	Bonds	Equities	Near Cash
Portfolio A	38.5%	59.5%	2.0%
		Annual
	Investment Fee	0.1%
	Administration Fee	0.3%

Hi Nick, thanks so much for this info, great to know I have options. Thanks 

APR1964

Are earnings on a crystalized amount - uncrystallized if you follow what I mean?
So £100k crystalized might produce £6k earnings in a year - could you then take 25% of that increase as a tax free sum?

NoMore

No the whole point of crystallising is to track which amounts have had their Tax free lumpsum taken and so crystallised portions and any gains from them do not contribute to further tax free lumps sums. Its the uncrystallised portion that can grow and give more tax free lump sums.

Sarahspangles

APR1964 said:

Are earnings on a crystalized amount - uncrystallized if you follow what I mean?
So £100k crystalized might produce £6k earnings in a year - could you then take 25% of that increase as a tax free sum?

It’s one of the reasons to consider taking UFPLS, and paying a little tax now, rather than having all of your pension income from the 25% tax free element. You could end up paying more tax on your post-crystallisation gains than you’ve saved.

The downside of taking any taxable income from a pension is that it triggers the MPAA, limiting your future contributions to DC pensions to £10k per year