Trying to understand pension changes and feeling out of my depth

Yorkie1

Sounds like a Civil Service AVC?

They know your Normal Pension Age for Alpha and are, I think, transferring everyone who was on the default fund which you mention, into one which is targeted to a retirement year/period for that NPA.

The new fund is slightly higher in charges.

As others have said, there are non-default funds too.

DRS1

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

Doesn't everyone?

dunstonh

If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

How would you know that a drastic market correction is going to happen?

Multi-asset funds, by their very nature, will be less affected by stockmarket crashes.

Bostonerimus1

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

You should expect volatility in your investments and be able to deal with it. That is achieved by having a basic  understanding of market ups and downs and a plan of how to manage your investments through that volatility. FYI a pretty good plan once you have your asset allocation set is to do nothing at all. I worry that you are looking for unicorns right now. The first thing to do is understand your fund options and the basics of portfolio construction. Even if your portfolio is a single 60/40 multi-asset fund you should understand the philosophy behind it. Be prepared to see your pot go down from time to time and to stay invested for decades. 

NickPoole

Bostonerimus1 said:

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

You should expect volatility in your investments and be able to deal with it. That is achieved by having a basic  understanding of market ups and downs and a plan of how to manage your investments through that volatility. FYI a pretty good plan once you have your asset allocation set is to do nothing at all. I worry that you are looking for unicorns right now. The first thing to do is understand your fund options and the basics of portfolio construction. Even if your portfolio is a single 60/40 multi-asset fund you should understand the philosophy behind it. Be prepared to see your pot go down from time to time and to stay invested for decades. 

I have two conflicting plans - one is move the funds to drawdown and leave them there for the foreseeable. The other is to get them out of drawdown as quick as possible dodging 40% tax and stashing the money in ISAs. Basically stay is stocks and shares or move to cash. I think the multi asset is best place for the money while I think about it!

Cobbler_tone

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

You should expect volatility in your investments and be able to deal with it. That is achieved by having a basic  understanding of market ups and downs and a plan of how to manage your investments through that volatility. FYI a pretty good plan once you have your asset allocation set is to do nothing at all. I worry that you are looking for unicorns right now. The first thing to do is understand your fund options and the basics of portfolio construction. Even if your portfolio is a single 60/40 multi-asset fund you should understand the philosophy behind it. Be prepared to see your pot go down from time to time and to stay invested for decades. 

 The other is to get them out of drawdown as quick as possible dodging 40% tax and stashing the money in ISAs. 

It is why I like this forum. Highly educational and thought provoking, although I would be extremely guarded against any 'direct' advice as some posters do have rather strange approaches.

This (the above) is the situation I will face next year. I am considering FT annuities, or drawdown. The latter is an area I know very little about. The former takes any thinking out of it. I'd be bridging the gap between a £28k DB to 40% tax with a pot of £150k, before taking any lump sum. I'm happy with the secured income and won't be buying additional lifetime annuities.

This thread has also inspired me to tweak my pensions funds for my final year. I think once I get to my final 6 months I might lose my bottle (even though it wouldn't inherently change my retirement plans) and move to the cash fund. I don't like the idea of it potentially dipping when I have my final total in mind.

I'm sure I'll be back at a later date to educate myself on the approach and pitfalls of drawdown.

Bostonerimus1

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

You should expect volatility in your investments and be able to deal with it. That is achieved by having a basic  understanding of market ups and downs and a plan of how to manage your investments through that volatility. FYI a pretty good plan once you have your asset allocation set is to do nothing at all. I worry that you are looking for unicorns right now. The first thing to do is understand your fund options and the basics of portfolio construction. Even if your portfolio is a single 60/40 multi-asset fund you should understand the philosophy behind it. Be prepared to see your pot go down from time to time and to stay invested for decades. 

I have two conflicting plans - one is move the funds to drawdown and leave them there for the foreseeable. The other is to get them out of drawdown as quick as possible dodging 40% tax and stashing the money in ISAs. Basically stay is stocks and shares or move to cash. I think the multi asset is best place for the money while I think about it!

If you are thinking of drawdown you should plan for perhaps a 30 year time horizon and given inflation you will probably need your money to grow to keep up with inflation so going to cash isn't a great move for most people. I'd probably put the money into an S&S ISA and maybe guarantee a base income using the state pension and an annuity, there are lots of good approaches, but cash wouldn't be one of those IMO.

Does your plan have you taking your tax free lump sum and the income up to the top of the 20% tax bracket each year?

NickPoole

Bostonerimus1 said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

You should expect volatility in your investments and be able to deal with it. That is achieved by having a basic  understanding of market ups and downs and a plan of how to manage your investments through that volatility. FYI a pretty good plan once you have your asset allocation set is to do nothing at all. I worry that you are looking for unicorns right now. The first thing to do is understand your fund options and the basics of portfolio construction. Even if your portfolio is a single 60/40 multi-asset fund you should understand the philosophy behind it. Be prepared to see your pot go down from time to time and to stay invested for decades. 

I have two conflicting plans - one is move the funds to drawdown and leave them there for the foreseeable. The other is to get them out of drawdown as quick as possible dodging 40% tax and stashing the money in ISAs. Basically stay is stocks and shares or move to cash. I think the multi asset is best place for the money while I think about it!

If you are thinking of drawdown you should plan for perhaps a 30 year time horizon and given inflation you will probably need your money to grow to keep up with inflation so going to cash isn't a great move for most people.
How will taking your money out asap avoid 40% tax, does your plan have you taking income up to the top of the 20% tax bracket?

I'm 67 next March and will probably fully retire Autumn 2026  with various pensions totalling c£43K. The AVC pot will be about £80K by then (about £17K tax free). So abou £63K into drawdown which I can either leave to grow or get out slowly keeping under 40% threshold

Cobbler_tone

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

You should expect volatility in your investments and be able to deal with it. That is achieved by having a basic  understanding of market ups and downs and a plan of how to manage your investments through that volatility. FYI a pretty good plan once you have your asset allocation set is to do nothing at all. I worry that you are looking for unicorns right now. The first thing to do is understand your fund options and the basics of portfolio construction. Even if your portfolio is a single 60/40 multi-asset fund you should understand the philosophy behind it. Be prepared to see your pot go down from time to time and to stay invested for decades. 

I have two conflicting plans - one is move the funds to drawdown and leave them there for the foreseeable. The other is to get them out of drawdown as quick as possible dodging 40% tax and stashing the money in ISAs. Basically stay is stocks and shares or move to cash. I think the multi asset is best place for the money while I think about it!

If you are thinking of drawdown you should plan for perhaps a 30 year time horizon and given inflation you will probably need your money to grow to keep up with inflation so going to cash isn't a great move for most people.
How will taking your money out asap avoid 40% tax, does your plan have you taking income up to the top of the 20% tax bracket?

I'm 67 next March and will probably fully retire Autumn 2026  with various pensions totalling c£43K. The AVC pot will be about £80K by then (about £17K tax free). So abou £63K into drawdown which I can either leave to grow or get out slowly keeping under 40% threshold

If it is a 'deal breaker' to ever cross the 40% threshold and you have no need for the money, you may as well buy a fixed term annuity and phase it accordingly. Unless you enjoy the admin and watching your pot go up and down. Should see you through to your late 70's.
Once I retire I like the idea of removing any 'hassle factor' in that regard.

Linton

NickPoole said:

Cobbler_tone said:

NickPoole said:

Bostonerimus1 said:

NickPoole said:

Let me ponder. I sort of wanted a FTSE tracker fund anyway and it being cheaper does tempt me. Understand that a crash will hit it harder than the Multi Asset fund and also that any recovery might take years!

I don't have to actually do anything except think about it at the moment.

How much is the US index tracker..?

Just take a couple of days to read up on portfolio construction and asset allocation. You need to understand how risk and return should be balanced against the time you plan to be invested and your circumstances, ie still working, approaching retirement or already retired. Here's a starting point...

https://www.bogleheads.org/wiki/Investing_from_the_UK

Cost - I prefer to pay as little as possible!

I don't think that should be a main focus, otherwise stick it in 'cash fund 3' for 0.09%

I guess what I am saying is I want as big as gain as possible for as low cost and smallest risk as I can get. Which is obvious. If I switch it will be to a tracker fund but I'd need to be sure I could sit out drastic market corrections that could take several years to recover. If there is a big crash it will also affect the Multi Asset Fund after all. But not the ISAs!

Unfortunately you cannot maximise gain and minimise risk at the same time. Chasing gains increases the risk that you don’t actually achieve a gain you could have made more easily or even lose money. Conversely taking insufficient risk increases the likelihood you make insufficient gains.

So you need to find the sweet spot where the gain is sufficient to meet your needs and the level of risk does not keep you awake at night.

The first step is to estimate how much money is required to provide your needs within your planned timescale. You can then choose funds that are reasonably capable of providing this at an acceptable level of risk. If no such funds exist you would have to lower your ambitions.