ready made pension advice

Sarahspangles

It’s pretty normal for people to pay into a DC workplace pension, and when they first set it up, to tick the option that looks like the recommended default investment. I’ve had two like this within the last ten years, for short contracts. The pension literature/website for each talked about annuity purchase as the main option on retirement, pension freedoms were a very new thing at that point. It’s easy to assume you're taking the optimal approach and forget about it.

There’s a lot to get your head round if you decide to change tack, whether that’s by choosing a new personal pension rather than your employer’s, or switching some or all of your pot to a SIPP.

@jimboger1 When I transferred my DC a pot to a SIPP I read a couple of books by John Edward’s, one was DIY Pensions. It will be a bit out of date now, and it looks like he’s now ’Retired retired’ rather than just retired! Maybe there’s a new writer with similar simple advice. Maybe one of the regulars on this board should write one!

For what it’s worth, as soon as I fixed a retirement date I sold enough of a more risky fund to fund a year’s pension. I bought a short term money market fund (STMMF) with this. When I need to take a UFPLS I will sell the STMMF to release the cash. Had I not brought forward my retirement date I might have been making the move into less volatile investments ‘in instalments’ and further in advance. As it is, I was about 20 months out from needing the cash. The following year’s pension is currently in a less risky fund, but I also have the option of funding a year from savings so I haven’t moved this into a STMMF as early.

jimboger1

Roger175 said:

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. 

thank you Roger, it's a bit of a learning curve, but I think I'm learning - lol

jimboger1

Sarahspangles said:

It’s pretty normal for people to pay into a DC workplace pension, and when they first set it up, to tick the option that looks like the recommended default investment. I’ve had two like this within the last ten years, for short contracts. The pension literature/website for each talked about annuity purchase as the main option on retirement, pension freedoms were a very new thing at that point. It’s easy to assume you're taking the optimal approach and forget about it.

There’s a lot to get your head round if you decide to change tack, whether that’s by choosing a new personal pension rather than your employer’s, or switching some or all of your pot to a SIPP.

@jimboger1 When I transferred my DC a pot to a SIPP I read a couple of books by John Edward’s, one was DIY Pensions. It will be a bit out of date now, and it looks like he’s now ’Retired retired’ rather than just retired! Maybe there’s a new writer with similar simple advice. Maybe one of the regulars on this board should write one!

For what it’s worth, as soon as I fixed a retirement date I sold enough of a more risky fund to fund a year’s pension. I bought a short term money market fund (STMMF) with this. When I need to take a UFPLS I will sell the STMMF to release the cash. Had I not brought forward my retirement date I might have been making the move into less volatile investments ‘in instalments’ and further in advance. As it is, I was about 20 months out from needing the cash. The following year’s pension is currently in a less risky fund, but I also have the option of funding a year from savings so I haven’t moved this into a STMMF as early.

thank you Sarah - whilst I started this threading thinking I wanted a higher return, in reality from some of the comments, I need to tread warily
at present I have around 330k and by xmas should have around 400k - I'm now thinking that I should opt for something like you suggest, to keep what I have fairly safe - ive also been looking at the 4% theory, and if I could even get somewhere round about that figure, then I think I'd be happy
PensionBee & MoneyFarm do a couple of funds that claim to track the Bank of England base rate, so maybe I should be considering that for safety reasons
thanks again for your input
Jim

gm0

McClung - Living off your Money.  Very hard read.  Yet recommended

Very confidence building on risk management of drawdown in deaccumulation.   And method selection. You don't have to agree with his assembled final personal method set to get value from what works better and worse in testing and the size of the difference.  No UK tax planning (few books have this).  But as good as you will find on drawdown access method selection. How much. How balanced. Portfolio.  Caps and collars for income. What to sell. etc.

Many approaches are "good enough" under a wide range of already experienced and speculations about future conditions.  Some are little better.  Some are a little worse - depending on the assumptions made about the future.

SWR analysis of the MonteCarol (random sequence of returns statistical simulation) or backtesting varieties (FireSim, FireCalc) can do no more than that. It is not predictive.  It merely tells us how existing cohorts got on, or how we would get on if the world behaved within a certain envelope of financial market behaviour.

Marcon

jimboger1 said:

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 

With earnings of £100K+, wouldn't spending some time with an independent financial adviser be an idea? Could be the best investment you'll make - you've been shovelling cash into a pension https://forums.moneysavingexpert.com/discussion/6591460/help-with-pension-contributions-be-gentle/p1 but what to do now it's there and how to take it out are a whole new ball game.

jimboger1

Marcon said:

jimboger1 said:

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 

With earnings of £100K+, wouldn't spending some time with an independent financial adviser be an idea? Could be the best investment you'll make - you've been shovelling cash into a pensionbut what to do now it's there and how to take it out are a whole new ball game.

yes I agree a good FA would be great, but ive had a couple of not so good experiences with FA's in the past so a bit wary tbh

dunstonh

jimboger1 said:

Marcon said:

jimboger1 said:

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 

With earnings of £100K+, wouldn't spending some time with an independent financial adviser be an idea? Could be the best investment you'll make - you've been shovelling cash into a pensionbut what to do now it's there and how to take it out are a whole new ball game.

yes I agree a good FA would be great, but ive had a couple of not so good experiences with FA's in the past so a bit wary tbh

FAs and IFAs are different.  FAs are sale reps of the companies they represent.   IFAs represent the client and are not beholden to any provider or fund house.

jimboger1

dunstonh said:

jimboger1 said:

Marcon said:

jimboger1 said:

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 

With earnings of £100K+, wouldn't spending some time with an independent financial adviser be an idea? Could be the best investment you'll make - you've been shovelling cash into a pensionbut what to do now it's there and how to take it out are a whole new ball game.

yes I agree a good FA would be great, but ive had a couple of not so good experiences with FA's in the past so a bit wary tbh

FAs and IFAs are different.  FAs are sale reps of the companies they represent.   IFAs represent the client and are not beholden to any provider or fund house.

understood, but the last IFA I dealt with didn't really offer anything I didn't already know tbh

Marcon

jimboger1 said:

dunstonh said:

jimboger1 said:

Marcon said:

jimboger1 said:

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 

With earnings of £100K+, wouldn't spending some time with an independent financial adviser be an idea? Could be the best investment you'll make - you've been shovelling cash into a pensionbut what to do now it's there and how to take it out are a whole new ball game.

yes I agree a good FA would be great, but ive had a couple of not so good experiences with FA's in the past so a bit wary tbh

FAs and IFAs are different.  FAs are sale reps of the companies they represent.   IFAs represent the client and are not beholden to any provider or fund house.

understood, but the last IFA I dealt with didn't really offer anything I didn't already know tbh

Looking at this thread https://forums.moneysavingexpert.com/discussion/6591460/help-with-pension-contributions-be-gentle/p1 there's a lot pretty much any FA or  IFA could have done to expand your knowledge! To dismiss them with an airy 'didn't offer anything I didn't already know' suggests you might not have correctly identified just how much you do actually know?

jimboger1

gm0 said:

For DIY - several of the SIPP platforms are cheaper than those listed

>Pension Bee, Moneyfarm, Nutmeg

Say iWeb.  Or Fidelity.   Cashback offers exist.  

£95 capped platform fee for Fidelity if you hold ETFs.  Regardless of size of total funds in them.
Trades are not the cheapest but for a pension these need not be frequent unless that becomes your preferred behaviour.

Each of those you list have a simplified offer.  Pre-packaged.  More modern apps and digital.  And they cost a bit more to hold investments than some alternatives.

It's all a balance of the customer experience you want. 
Fee drag

Transfer process can be easy or painful with anyone.

Just an example.



£1250 cashback. 

With funds this is not an especially cheap % of pot platform. 0.2% over 250k. 0.35% below.  Capped at £1m.  So 2k max. But with ETFs only £95 capped - or indeed something in between with a mixture of investments of fund type and ETF type. £1250 cash to come - is a free year of platform fess with funds at 400k.  And a lot more than that with ETFs.

If still adding to pension you need to scrutinise the regular payment plan and arrangements and trade fees to work out what the true costs are for a given platform. And your intended behaviour.

Lots of choice available.

All the majors will have the main investments you are likely to want covered.  They may not have all the variations from all the fund managers.  Each has a list.  So start with "what I want to invest in" and work from there.

thanks gm0 - ive used that link, but I couldn't really see an option which is based on the cash funds that people are mentioning