ready made pension advice

jimboger1

NoMore said:

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 !!

yes, I am a bit low on finance knowledge hence why im on here

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. 

thanks for your encouragement 

dunstonh

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

Did you pay them?   Most IFAs will not tell you solutions or things to do until you employ them. If you only have the free initial meeting then you will never get too much from that.

jimboger1

dunstonh said:

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

Did you pay them?   Most IFAs will not tell you solutions or things to do until you employ them. If you only have the free initial meeting then you will never get too much from that.

initial meeting only, but told me nothing tbh

gm0

You need to read up a bit more.  The fidelity link took you to them as an example platform.  Not saying you should necessarily use them.  An example of cost and cashback

They won't have all the specific funds or ETFs that people may mention in a forum that are available somewhere
Yet they will have something with near identical investments

- Cash interest

- Short term money market (SONIA)

- Gilts
- Corporate bonds
- Global Equities
- Uk Equities etc

Nobody here is going to tell you what to do that can *consistently* meet you objectives.  Rewards are for risk taken.  Volatility happens

All the low risk options - cash, mmf, gilts etc will provide lower than desired returns - but generally at lower volatility and lower risk. Other options (equities and others) can perform or suffer major short term drops.

jimboger1

gm0 said:

You need to read up a bit more.  The fidelity link took you to them as an example platform.  Not saying you should necessarily use them.  An example of cost and cashback

They won't have all the specific funds or ETFs that people may mention in a forum that are available somewhere
Yet they will have something with near identical investments

- Cash interest

- Short term money market (SONIA)

- Gilts
- Corporate bonds
- Global Equities
- Uk Equities etc

Nobody here is going to tell you what to do that can *consistently* meet you objectives.  Rewards are for risk taken.  Volatility happens

All the low risk options - cash, mmf, gilts etc will provide lower than desired returns - but generally at lower volatility and lower risk. Other options (equities and others) can perform or suffer major short term drops.

thank you gm0

wjr4

jimboger1 said:

dunstonh said:

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

Did you pay them?   Most IFAs will not tell you solutions or things to do until you employ them. If you only have the free initial meeting then you will never get too much from that.

initial meeting only, but told me nothing tbh

They usually won’t say too much in the first meeting as it’s unlikely they gather your full information then, which is needed for advice. 

ian16527

Read the John Edwards books as someone recommended above - they used to be on Kindle unlimited or you can buy for a few pounds. 

Also what happens when you run out of money as £25K per year will only last 16 years. Have you any Final Salary pensions to fall back on or just the state pension?

It may be wise to use some of your cash pot to buy an annuity to give some fixed income for when the drawdown pot runs out, although you would have to reduce the £25K pa figure downwards if you want it to last for the same amount of time

jimboger1

ian16527 said:

Read the John Edwards books as someone recommended above - they used to be on Kindle unlimited or you can buy for a few pounds. 

Also what happens when you run out of money as £25K per year will only last 16 years. Have you any Final Salary pensions to fall back on or just the state pension?

It may be wise to use some of your cash pot to buy an annuity to give some fixed income for when the drawdown pot runs out, although you would have to reduce the £25K pa figure downwards if you want it to last for the same amount of time

thanks, but the only way the £25k/year will run out after 16 years is if there is no growth whatsoever, with something like 4% it will last way longer 
I do have a small final salary pension paying around £7k per year and I will have rental income in a few years  of around £30k per year - I am married, so the £25k will only be part of my retirement fund 

KevinTHFC

jimboger1 said:

thanks, but the only way the £25k/year will run out after 16 years is if there is no growth whatsoever, with something like 4% it will last way longer 

Have you considered the effects of a market crash which could turn your £400K pot into 200K overnight?