Retirement advice / de-risking investment portfolio

AsifM068

Help please forum.

When I am 60, I plan to retire when my Civil Service DB pension kicks in; it is currently valued at 13K PA with a 40k lump sum.

I will need about 26K PA to live comfortably between 60 and retirement age.

I have 200K in the FTSE Global All Cap at present with Vanguard.

Do I take 26-13 = 13K per year from the fund or should I park 7 years (until state pension age) * 13 = 91K in a cash like instrument such as Vanguard's money market fund when 59 or so (need advice here as to when please), to guard against any market crashes?

I will be 57 in October and plan to work part time until 60. 

I am not a seasoned investor so please break it down easily for me please - many thanks.

QrizB

I take it you're expecting that, once you get to State Pension Age, your DB plus SP will satisfy your income needs? So you're focusing on how to bridge from 60 to 67?

If so,.I'd suggest that you might want to start moving money into safer investments now. You'll want to begin accessing your SIPP in about three years, which is soon enough that you probably don't want to be in 100% equities.

What do you have planned for your £40k lump sum? That could be held in eg. a cash ISA (two years worth) and could help to supply 3 years of £13k, if necessary.

AsifM068

QrizB said:

I take it you're expecting that, once you get to State Pension Age, your DB plus SP will satisfy your income needs? So you're focusing on how to bridge from 60 to 67?

If so,.I'd suggest that you might want to start moving money into safer investments now. You'll want to begin accessing your SIPP in about three years, which is soon enough that you probably don't want to be in 100% equities.

What do you have planned for your £40k lump sum? That could be held in eg. a cash ISA (two years worth) and could help to supply 3 years of £13k, if necessary.

Re bridge - that is correct. You refer to a SIPP, which I don't have. All I have is my S&S ISA with Vanguard re the 200K in the Global All Cap.

I guess the 40K could also be moved into the money market fund to help supply 3 years of £13K like you say.

Regarding timing to move the funds into a safer instrument - I will be 57 in October. I wanted 2 more years in full equity - or is this too risky and the time to move funds is now like you suggest?

Triumph13

I would be inclined to break it down this way:

1. Your DB will use up your personal allowance, so your state pension (assuming full NSP) will add roughly £9.6k pa after tax.  You need to bridge seven years of that, so £67k in total.
2. Your DB lump sum will provide £40k of that in cash at age 60.  I would be inclined to put the remaining £27k into a money market fund or cash ISA sooner rather than later. 
3. DB + SP / bridging cash gives you a nice safe £22.5k pa.  You want another £3.5k and have about £170k of assets to achieve that.  3% drawdown would be £5.1k so you should be laughing.

I would also be looking to put ALL of your taxable earnings for the rest of your time working into a personal pension and live off the ISAs.  That gives a 6.25% return thanks to the tax free lump sum.  It also makes it easier if you wanted to buy an annuity with some of your funds.

AsifM068

Triumph13 said:

I would be inclined to break it down this way:

1. Your DB will use up your personal allowance, so your state pension (assuming full NSP) will add roughly £9.6k pa after tax.  You need to bridge seven years of that, so £67k in total.
2. Your DB lump sum will provide £40k of that in cash at age 60.  I would be inclined to put the remaining £27k into a money market fund or cash ISA sooner rather than later. 
3. DB + SP / bridging cash gives you a nice safe £22.5k pa.  You want another £3.5k and have about £170k of assets to achieve that.  3% drawdown would be £5.1k so you should be laughing.

I would also be looking to put ALL of your taxable earnings for the rest of your time working into a personal pension and live off the ISAs.  That gives a 6.25% return thanks to the tax free lump sum.  It also makes it easier if you wanted to buy an annuity with some of your funds.

This is most encouraging to hear my friend - but just a query.

'You need to bridge seven years of that, so £67k in total' - how did you get 67K please? I'm at 60 say and start receiving £13K per year DB pension; so I need to top up the £13k to £25k, that's £12K.Times that by 7 years is £72K. I missed something? 

AsifM068

Had not factored in the tax man...doh!

QrizB

AsifM068 said:

QrizB said:

I take it you're expecting that, once you get to State Pension Age, your DB plus SP will satisfy your income needs? So you're focusing on how to bridge from 60 to 67?

If so,.I'd suggest that you might want to start moving money into safer investments now. You'll want to begin accessing your SIPP in about three years, which is soon enough that you probably don't want to be in 100% equities.

What do you have planned for your £40k lump sum? That could be held in eg. a cash ISA (two years worth) and could help to supply 3 years of £13k, if necessary.

Re bridge - that is correct. You refer to a SIPP, which I don't have. All I have is my S&S ISA with Vanguard re the 200K in the Global All Cap.

Apologies, I misread. Yes, SSISA.
As Triumph13 says above, opening a SIPP and stuffing it with your earnings while spending your ISA will have tax advantages.

Brie

Do you have to take a lump sum?  Or (as already asked) do you have plans for it?  And do you have to take that much of a lump sum? 

I'd jiggle the numbers around and consider what you might do if you didn't take any LS versus a smaller one.

And is anyone else going to be dependent on you for money, particularly after you kick off?  

AsifM068

Brie said:

Do you have to take a lump sum?  Or (as already asked) do you have plans for it?  And do you have to take that much of a lump sum? 

I'd jiggle the numbers around and consider what you might do if you didn't take any LS versus a smaller one.

And is anyone else going to be dependent on you for money, particularly after you kick off?  

No dependents and I am in the Civil Service Classic deferred pension scheme, so I need to check the rules about the lump sum and if there is any scope for any flexibility. 

QrizB

AsifM068 said:

Brie said:

Do you have to take a lump sum?  Or (as already asked) do you have plans for it?  And do you have to take that much of a lump sum? 

I'd jiggle the numbers around and consider what you might do if you didn't take any LS versus a smaller one.

And is anyone else going to be dependent on you for money, particularly after you kick off?  

No dependents and I am in the Civil Service Classic deferred pension scheme, so I need to check the rules about the lump sum and if there is any scope for any flexibility. 

The default lump sum with Classic is 3x your annual pension, which matches your £13k / £40k numbers.

I don't think you can take less, and taking more is probably not going to help.

AsifM068

Can someone check these sums for me please based upon a retirement age of 60 with a DB pension of £13k per year and a £40K lump sum.

To cover the 7 bridging years until state pension age, I will need an additional 7*13 (to give me a retirement income of 13+13= 26K per year). This equals 7*13 = 91K. 

Now minus the lump sum of 40K, this will be around 50k - so this is the sum that I need to move from my 200K Global All Cap pot to a MMF - is this correct please, as going by advice, I need to act ASAP! ??? 

Thank you all so much for your help.