ready made pension advice

DRS1

jimboger1 said:

GenX0212 said:

DRS1 said:

jimboger1 said:

DRS1 said:

jimboger1 said:

SVaz said:

You either sell funds to create a ‘cash pot’  with 2/3 years of income in it or you stop investing your ongoing contributions and leave them as cash OR put them into a short term money market fund if one is available. 

Presumably your SW pension pays interest on cash held within 
I assume you hold accumulation funds if you have no ‘cash pot’ . 

  Would the funds you hold pay enough in dividends every year to cover what you will draw?    If so then you could just switch to income funds. 

sorry, but I have no idea what you are advising - im a novice here 

Are you sure you don't want an annuity?

If you want to go down a drawdown route you are going to need to understand (and do) what he is saying.  You have a year to go so now is the time to do some reading (on here and elsewhere) watch some youtube videos and educate yourself on the subject

thanks, I do understand drawdown

Good  So you understand the need for cash if you are drawing down benefits from your pension.

Have you established that the SW pension supports the sort of drawdown you want to do?

Hold on, what 'need for cash'? It depends on the OPs attitude to risk surely? I intend to retire next year via drawdown and at the moment plan to leave my money invested in non-cash funds with a split across lower risk mixed funds and higher risk equity. Not everyone subscribes to a need for cash.

thanks, I think that is where I am at right now tbh - although I was looking on moving my 320k into something that willl give me around 5%, which im not getting at present 

OK but you also say you plan to withdraw £25k pa.  That means next year you will need £25k in cash. And another £25k the next year and so on.

How do you get that cash?  Well you are putting £80k into the pension so you could keep £75k of that in a money market fund or a short term gilt ladder to cover the first three years.

Or you could invest in something which throws off cash and get it that way.  Will a £400k pot throw off £25k of income a year?  Not in a global equity tracker it won't (well I am guessing there I haven't looked at the yield on one of them but you don't get much in the way of dividends from the US which is about 60% of a global tracker).

Or you could sell something.

But whatever you do you need to make a plan for it now if you are going to start drawing money out of the pension next year.

DRS1

This may be of interest - if you can get past the plugs and adverts.

How To Invest Your UK Pension Drawdown For Taking Income

jimboger1

DRS1 said:

jimboger1 said:

GenX0212 said:

DRS1 said:

jimboger1 said:

DRS1 said:

jimboger1 said:

SVaz said:

You either sell funds to create a ‘cash pot’  with 2/3 years of income in it or you stop investing your ongoing contributions and leave them as cash OR put them into a short term money market fund if one is available. 

Presumably your SW pension pays interest on cash held within 
I assume you hold accumulation funds if you have no ‘cash pot’ . 

  Would the funds you hold pay enough in dividends every year to cover what you will draw?    If so then you could just switch to income funds. 

sorry, but I have no idea what you are advising - im a novice here 

Are you sure you don't want an annuity?

If you want to go down a drawdown route you are going to need to understand (and do) what he is saying.  You have a year to go so now is the time to do some reading (on here and elsewhere) watch some youtube videos and educate yourself on the subject

thanks, I do understand drawdown

Good  So you understand the need for cash if you are drawing down benefits from your pension.

Have you established that the SW pension supports the sort of drawdown you want to do?

Hold on, what 'need for cash'? It depends on the OPs attitude to risk surely? I intend to retire next year via drawdown and at the moment plan to leave my money invested in non-cash funds with a split across lower risk mixed funds and higher risk equity. Not everyone subscribes to a need for cash.

thanks, I think that is where I am at right now tbh - although I was looking on moving my 320k into something that willl give me around 5%, which im not getting at present 

OK but you also say you plan to withdraw £25k pa.  That means next year you will need £25k in cash. And another £25k the next year and so on.

How do you get that cash?  Well you are putting £80k into the pension so you could keep £75k of that in a money market fund or a short term gilt ladder to cover the first three years.

Or you could invest in something which throws off cash and get it that way.  Will a £400k pot throw off £25k of income a year?  Not in a global equity tracker it won't (well I am guessing there I haven't looked at the yield on one of them but you don't get much in the way of dividends from the US which is about 60% of a global tracker).

Or you could sell something.

But whatever you do you need to make a plan for it now if you are going to start drawing money out of the pension next year.

my plan was to take £25k through a mix of tax free and taxed - then leave the rest to grow at around 5% PA, thus recouping some of the £25k
I do need to make a plan, hence the post on here 

jimboger1

DRS1 said:

This may be of interest - if you can get past the plugs and adverts.

thanks ill check it out

kimwp

The purpose of having cash is so that if the market drops and your pension pot drops with it, you can use your cash to live on until the market has recovered rather than withdrawing from a shrunken pension fund. If that market crash happens at the start of your retirement and you are withdrawing from your shrunken fund, those withdrawals will have a much bigger effect on the size of the fund later in retirement than if the crash hadn't happened. So you need some plan for a market crash at an inopportune time - this could be a cash reserve, accumulating a pot that will still be enough even with a market crash just as you retire, planning to cut back on expenses in that eventuality etc 

DRS1

SW Pension Portfolio Four Pn CS8 Fund factsheet | Trustnet

Is this what your pension is invested in?  If so it is heavily into fixed interest (53%) and took a bit of a knock a few years ago.

You can of course switch to something more equity heavy.  Though whether now is the time to do that I really could not say - some people think there is a bubble -especially for US Tech.  Also doing it a year before your retirement seems counter-intuitive.  That would be a time to go more conservative usually but of course if you go into draw down you have more years for investment performance to have an effect than if you were looking at a period of just one year.
Here is another youtube video in case you are interested
Retirement Planning: How To De-Risk Your Portfolio Before Retirement?
Pensioncraft have some interesting videos though I have the impression they are trying to get viewers to join something for a fee.

jimboger1

DRS1 said:

Is this what your pension is invested in?  If so it is heavily into fixed interest (53%) and took a bit of a knock a few years ago.

You can of course switch to something more equity heavy.  Though whether now is the time to do that I really could not say - some people think there is a bubble -especially for US Tech.  Also doing it a year before your retirement seems counter-intuitive.  That would be a time to go more conservative usually but of course if you go into draw down you have more years for investment performance to have an effect than if you were looking at a period of just one year.
Here is another youtube video in case you are interested

Pensioncraft have some interesting videos though I have the impression they are trying to get viewers to join something for a fee.

yes that is the scheme I am in at present - the SW Portfolio 4, CS8
your assumption is the way I was thinking too - as I go into drawdown , I'd ideally like to be in something that gives me small growth, without too many risks - enough growth to recoup some, but not all of the £20 to £25k I intend to withdraw each year - hope that. makes sense 

Roger175

Jimboger1

You have posted a question on here and been bombarded by responses which in the short term clearly don't mean much to you, but the advice is generally good. Don't feel bamboozled by it, rather, take your time to familiarise yourself with things and it will all start falling into place.

I was totally confused by it all when I first started getting into DIY investing a few year ago, but now I've got my head round it, it isn't actually that complicated and as you learn the terminology, you will realise there is a huge collective goldmine of good information and advice to be had by regularly checking out this forum.

A few basics which might help with some of the above comments - firstly and fundamentally, it is the investments (ie the funds) which will govern the performance, not the actual pension company, so transferring to another provider for performance reasons won't really help (assuming you're going to invest in something similar).

Further, many funds come in two forms, accumulation (ACC) or income (INC). The former takes any income in the form of dividends etc and reinvests it in the the fund itself, the latter pays any income back into to your account in the form of cash. The underlying investments in the two fund types are generally the same.

Also, there are various forms of drawdown as you have probably realised. Research these and make a decision on which best suits you. For instance I have recently made my first drawdown payment using the UFPSL method (uncrystallised fund pension lump sum). This is the method where you choose not to take the 25% tax free cash up front (consequently crystallising the overall fund), but instead take lumps sums as and when you need, with 25% of each being subject to 25% tax free.  Whatever method you choose needs to be supported by your pension provider and you may possibly need to transfer your pension to a new SIPP type provider. If this proves to be the case, it it a relatively simple process which you can do yourself, but do allow sufficient time. I did two transfers last year, one took a few days, the other over 2 months.

Finally, don't be afraid to ask further question as you get into it, you're anonymous on here so ask as many silly questions as you like!, honestly, give it a few months and you'll wonder why it seemed such a mystery to start with. 

SVaz

OP doesn’t seem to understand the fact that he needs to release cash from his fund on a regular basis - the money doesn’t magically appear,  selling during a dip/ crash in the markets will have a big detrimental effect on his remaining pension.
He’ll be drawing 6.5% of a £400k pot at £25k.
If the value drops 20%,  that becomes 8%. 

He could, of course, take £100k tax free cash and live off that for 4 years,  or better still £25k tfc a year,  but he still has to have that in CASH,  then there is still the issue of year 5 and beyond,  he will still have to decide when and how much cash to release

No investments can guarantee constant linear growth of +5%,  that’s why we build cash reserves, so market ups and downs have no impact on what we can draw. 

I imagine he will reduce his drawdown at 67 but a few bad years could see his pot decimated,  that’s at zero growth, let alone some negative years. 

NoMore

Having buckets (one of which is cash) is one drawdown strategy but it is not the only one and that you must have it.

There's plenty of other ways to set up your portfolio, just selling equities when you require is a valid strategy as is living off dividends or any other various ways that don't require a cash bucket.

The infamous SWR research does not require or expect a cash bucket. There is an argument that a cash reserve actually doesn't do much, the gains lost via it not invested do not make up for not having to sell in a down market. I am not saying whether I agree or disagree with this.

I am not advocating any particular drawdown strategy and don't really wish to be dragged in to the merits or not of each, but merely pointing out that a cash reserve is not the only game in town.

However, the OP appears to have no strategy at all, which is probably the worst idea, so at least researching and deciding on one would be better, but be prepared the rabbit hole can go deep !!