Staying with an L&G workplace pension into drawdown, or move?

Doonhamer

Trying to decide what to do when I retire early in the late spring (59). I have a couple of small DC schemes which I'll be taking giving me around £5kpa and £550k in L&G DC. 70% in PMC World (ex-UK) Index 3 and the rest split cash and short dated bond and £160k general savings. I have a small +1% protected PCLS status and need to take that in full to keep this. I don't need to touch the DC pot this year as I will use savings and DB PCLS and will use up my tax annual allowance this year. In April 26 I was thinking of taking the full tax free cash and for the next 6 or 7 years I only intended to take the balance on my tax free allowance £7.5kpa from the crystalised pot and run down savings. Taking me and my wife probably to full state pensions dates (she has a small DB already and is retired). I was thinking that I can just leave my remaining pot with L&G but change it to 100% in the World Index for a year or two and review that each year as my liquid assets reduce, I'll have 40% cash effectively to begin with. The reason for keeping in with L&G is the fees seem quite low, the fund is fairly generic and I'm fairly happy to DIY, but I'd appreciate any thoughts on this in case I'm being a bit naive? I did see a FA a while back but she's moved to TP like many have and the fees seem a lot for what extra value I might get? A reason to move it out of L&G would be to have more flexibility around the staging of drawdown which L&G don't provide, I'd lose the small difference in PCLS, and have higher fees I guess, but would that be the better approach? I don't want to do the wrong thing just to save on fees and actually be worse off for that. Thanks for any opinions

Albermarle

 I have a couple of small DC schemes which I'll be taking giving me around £5kpa 
Presume you mean DB schemes ?

 In April 26 I was thinking of taking the full tax free cash and for the next 6 or 7 years I only intended to take the balance on my tax free allowance £7.5kpa from the crystalised pot and run down savings

It is a good idea to take the £7.5Kpa taxable to use up the personal allowance. However you do not have to take all the tax free cash in one go, you could spread it out. If the L&G pension allows this, which from what you say it may not.
 A reason to move it out of L&G would be to have more flexibility around the staging of drawdown which L&G don't provide

I'd lose the small difference in PCLS, and have higher fees I guess, but would that be the better approach?
You can not assume you will have higher fees. How much do you pay now?

I was thinking that I can just leave my remaining pot with L&G but change it to 100% in the World Index for a year or two and review that each year as my liquid assets reduce, I'll have 40% cash effectively to begin with.

Would you be OK if the fund dropped 40% in a market crash?

DRS1

 I don't need to touch the DC pot this year as I will use savings and DB PCLS and will use up my tax annual allowance this year.

I am not sure I understand this.  What is using up the tax annual allowance?  Does this year mean 24/5 or 25/6?

Are the savings in an ISA or outside?  How much taxable income do they generate?

and for the next 6 or 7 years I only intended to take the balance on my tax free allowance £7.5kpa from the crystalised pot and run down savings

You are taking a pension of £5k pa so that is presumably where the £7.5k comes from?  Does the £5k pension increase at all?  Of course the personal allowance may increase in due course.

Do you have dividends or taxable savings interest which may give you more allowances than just the personal allowance?

Are you ever planning to pay income tax on what you draw from the DC pension?  If not then why not take the protected PCLS (I think you mean TFLS?) in full whenever you have to and put it in an ISA or two. Premium bonds. low coupon short dated gilts or some savings account giving you interest covered by the savings allowances.

Doonhamer

Albermarle said:

 I have a couple of small DC schemes which I'll be taking giving me around £5kpa 
Presume you mean DB schemes ?

 In April 26 I was thinking of taking the full tax free cash and for the next 6 or 7 years I only intended to take the balance on my tax free allowance £7.5kpa from the crystalised pot and run down savings

It is a good idea to take the £7.5Kpa taxable to use up the personal allowance. However you do not have to take all the tax free cash in one go, you could spread it out. If the L&G pension allows this, which from what you say it may not.
 A reason to move it out of L&G would be to have more flexibility around the staging of drawdown which L&G don't provide

I'd lose the small difference in PCLS, and have higher fees I guess, but would that be the better approach?
You can not assume you will have higher fees. How much do you pay now?

I was thinking that I can just leave my remaining pot with L&G but change it to 100% in the World Index for a year or two and review that each year as my liquid assets reduce, I'll have 40% cash effectively to begin with.

Would you be OK if the fund dropped 40% in a market crash?

Presume you mean DB schemes ?
Yes sorry they are both DB

It is a good idea to take the £7.5Kpa taxable to use up the personal allowance. However you do not have to take all the tax free cash in one go, you could spread it out. If the L&G pension allows this, which from what you say it may not.
L&G don't provide a staged withdrawal where you can take a regular monthly income that is part tax free and part taxable. Only way to do this is to take a number of UFPLS per year but this is more a manual process and I'd need to see what it costs each time to do this. Only regular income they support is from crystalised pot, idea being you take up to 25% tax free and then you can drawdown from what's left but all would be taxable income

You can not assume you will have higher fees. How much do you pay now?
My understanding is L&G charge 0.25% management fee for the value of the pot, and then there is the fund management charge. For the PMC World (ex-UK) Index 3 it is 0.12%. I can't remember what the True Potential girl said, I'd need to check but I'm sure working with them was something like1.5% in total. Which was why I was considering if just leaving it with L&G and asking for thoughts on here

Would you be OK if the fund dropped 40% in a market crash?
Yes that would be a worry of course, and the reason I was keeping 30-40% in cash was to use that as a buffer. I'd reduce the 100% in the index fund as the cash savings runs down to maintain this sort of ratio and try not to touch much of the equity during a crash. And adjust lifestyle as well if needed during that time.

Doonhamer

DRS1 said:

 I don't need to touch the DC pot this year as I will use savings and DB PCLS and will use up my tax annual allowance this year.

I am not sure I understand this.  What is using up the tax annual allowance?  Does this year mean 24/5 or 25/6?

Are the savings in an ISA or outside?  How much taxable income do they generate?

and for the next 6 or 7 years I only intended to take the balance on my tax free allowance £7.5kpa from the crystalised pot and run down savings

You are taking a pension of £5k pa so that is presumably where the £7.5k comes from?  Does the £5k pension increase at all?  Of course the personal allowance may increase in due course.

Do you have dividends or taxable savings interest which may give you more allowances than just the personal allowance?

Are you ever planning to pay income tax on what you draw from the DC pension?  If not then why not take the protected PCLS (I think you mean TFLS?) in full whenever you have to and put it in an ISA or two. Premium bonds. low coupon short dated gilts or some savings account giving you interest covered by the savings allowances.

Yes taking the TFLS in full and investing like you mention is the plan. I shouldn't pay any income tax for 5 or 6 years doing it this way. By using the tax allowance I did just mean taking from the crystalised pot an amount each year to top up my £5k DB pension to £12570 or whatever it is. Then I would still have £5k PA starter rate for savings tax allowance on top

Albermarle

Doonhamer said:

Albermarle said:

 I have a couple of small DC schemes which I'll be taking giving me around £5kpa 
Presume you mean DB schemes ?

 In April 26 I was thinking of taking the full tax free cash and for the next 6 or 7 years I only intended to take the balance on my tax free allowance £7.5kpa from the crystalised pot and run down savings

It is a good idea to take the £7.5Kpa taxable to use up the personal allowance. However you do not have to take all the tax free cash in one go, you could spread it out. If the L&G pension allows this, which from what you say it may not.
 A reason to move it out of L&G would be to have more flexibility around the staging of drawdown which L&G don't provide

I'd lose the small difference in PCLS, and have higher fees I guess, but would that be the better approach?
You can not assume you will have higher fees. How much do you pay now?

I was thinking that I can just leave my remaining pot with L&G but change it to 100% in the World Index for a year or two and review that each year as my liquid assets reduce, I'll have 40% cash effectively to begin with.

Would you be OK if the fund dropped 40% in a market crash?

Presume you mean DB schemes ?
Yes sorry they are both DB

It is a good idea to take the £7.5Kpa taxable to use up the personal allowance. However you do not have to take all the tax free cash in one go, you could spread it out. If the L&G pension allows this, which from what you say it may not.
L&G don't provide a staged withdrawal where you can take a regular monthly income that is part tax free and part taxable. Only way to do this is to take a number of UFPLS per year but this is more a manual process and I'd need to see what it costs each time to do this. Only regular income they support is from crystalised pot, idea being you take up to 25% tax free and then you can drawdown from what's left but all would be taxable income

You can not assume you will have higher fees. How much do you pay now?
My understanding is L&G charge 0.25% management fee for the value of the pot, and then there is the fund management charge. For the PMC World (ex-UK) Index 3 it is 0.12%. I can't remember what the True Potential girl said, I'd need to check but I'm sure working with them was something like1.5% in total. Which was why I was considering if just leaving it with L&G and asking for thoughts on here

Would you be OK if the fund dropped 40% in a market crash?
Yes that would be a worry of course, and the reason I was keeping 30-40% in cash was to use that as a buffer. I'd reduce the 100% in the index fund as the cash savings runs down to maintain this sort of ratio and try not to touch much of the equity during a crash. And adjust lifestyle as well if needed during that time.

Most retail pension providers ( retail as in dealing direct with customers, rather than through advisors) do not offer regular UFPLS either without a lot of manual input. Some people take one a year and put it in a savings account. 

0.37% charge is pretty competitive. You could save some money by moving but it would not be a lot.