How to manage pension

JDK1971

Hi

I will soon become able to access my DC pension fund which is currently worth £600k.

What I would like to do is have the certainty of knowing that 25% is not going to fall from the value of £150k no matter what happens to the market.  This will notionally cover my remaining mortgage and give me 2 years of expenditure which gives me the security I want, whilst leaving the majority of my funds invested. However, I don’t necessarily want to redeem the mortgage straight away.

Is the only way of achieving this through taking it as a TFLS?  

If I leave it in the pension, there is the risk that the fund as a whole falls, and 25% no longer equals £150k.  If I take it out of the pension then I have to find a home for the money and would not have enough ISA allowances etc.

My primary goal is to ensure that assuming rules/markets stay as they are, that I have ring fenced the £150k.

Thanks for any advice.

BobR64

Who is your pension with and do you have any control over the funds it is invested in? Does it all have to be invested in one fund or can you split it? Some providers offer cash like funds.

If your current provider is not very flexible you could consider transferring into a SIPP, which would allow you to do what you want.

Linton

There is no way to freeze the £150K value as a TFLS without taking it out of the pension.

If you are old enough you could take it now and invest it safely.  eg leave it as cash spread over 2 banks, buy gilts that mature when you will want the money, put it in NS&I which is protected for any amount etc

poseidon1

JDK1971 said:

Hi

I will soon become able to access my DC pension fund which is currently worth £600k.

What I would like to do is have the certainty of knowing that 25% is not going to fall from the value of £150k no matter what happens to the market.  This will notionally cover my remaining mortgage and give me 2 years of expenditure which gives me the security I want, whilst leaving the majority of my funds invested. However, I don’t necessarily want to redeem the mortgage straight away.

Is the only way of achieving this through taking it as a TFLS?  

If I leave it in the pension, there is the risk that the fund as a whole falls, and 25% no longer equals £150k.  If I take it out of the pension then I have to find a home for the money and would not have enough ISA allowances etc.

My primary goal is to ensure that assuming rules/markets stay as they are, that I have ring fenced the £150k.

Thanks for any advice.

Given your criteria my preference would be to transfer to a 100% money market fund, to preserve the £600k until the £150k is needed.

However,  assuming your DC pot is still with Standard Life, looking at their fund range the fund below seems to be the nearest they offer (65%:35% money market/ short dated bonds) - so not the guarantees you are seeking

https://digital.feprecisionplus.com/documents/standardlifepat/en-GB/R0PK/FS

How do you feel about transferring to a Sipp where you could load up on money market funds to your heart's content?

It would certainly grant you more control and of course much more investment choices for your residual funds after you take the amount you need in future.

Worth a thought has another option other than taking your TFC immediately, if you are prepared to step away from Standard Life's managed options.

aeronickuk

What about selling a proportion of your investments but keeping the cash within the pension wrapper. Does your present pension provider allow that? Some providers pay OK rates of interest on any cash inside the pension that isn't invested, so might be close to any return a MM fund might give. Cash won't grow like investments, but it won't fall

jimjames

Linton said:

There is no way to freeze the £150K value as a TFLS without taking it out of the pension.

I don't understand this. Surely you can sell investments to value of £150k and leave it as cash or money market funds without removing from the pension. The remaining 75% will stay invested and continue to fluctuate

wjr4

jimjames said:

Linton said:

There is no way to freeze the £150K value as a TFLS without taking it out of the pension.

I don't understand this. Surely you can sell investments to value of £150k and leave it as cash or money market funds without removing from the pension. The remaining 75% will stay invested and continue to fluctuate

The TFC will still fluctuate if the remaining 75% remains invested. 

NoMore

jimjames said:

Linton said:

There is no way to freeze the £150K value as a TFLS without taking it out of the pension.

I don't understand this. Surely you can sell investments to value of £150k and leave it as cash or money market funds without removing from the pension. The remaining 75% will stay invested and continue to fluctuate

They want to protect their 25% tax free cash at its current level, doing what you suggest won't do that, as if the 75% falls, then the available tax free amount falls. They would need to move 100% of it to cash/MMF to achieve it via your method.

Linton

jimjames said:

Linton said:

There is no way to freeze the £150K value as a TFLS without taking it out of the pension.

I don't understand this. Surely you can sell investments to value of £150k and leave it as cash or money market funds without removing from the pension. The remaining 75% will stay invested and continue to fluctuate

The OP seemed to be worried that if his pension fell in value the 25% of the whole would represent a smaller amount of money.  There is no way around that within the pension.

JDK1971

Linton said:

jimjames said:

Linton said:

There is no way to freeze the £150K value as a TFLS without taking it out of the pension.

I don't understand this. Surely you can sell investments to value of £150k and leave it as cash or money market funds without removing from the pension. The remaining 75% will stay invested and continue to fluctuate

The OP seemed to be worried that if his pension fell in value the 25% of the whole would represent a smaller amount of money.  There is no way around that within the pension.

Yes, that is correct.  You have answered my question really.   

I clearly need to take the 25% TfL’s to guarantee its value. 

ATM I’m still working and the pension pot amount is split across an HL SIPP and an occupational DC scheme with Standard Life which I intend to transfer across to the HL SIPP once I’ve left.


Any advice on how to house the £150k?  Will max ISAs this year and next year in April which leaves £110k to manage.

Thanks again.

Albermarle

JDK1971 said:

Linton said:

jimjames said:

Linton said:

There is no way to freeze the £150K value as a TFLS without taking it out of the pension.

I don't understand this. Surely you can sell investments to value of £150k and leave it as cash or money market funds without removing from the pension. The remaining 75% will stay invested and continue to fluctuate

The OP seemed to be worried that if his pension fell in value the 25% of the whole would represent a smaller amount of money.  There is no way around that within the pension.

Yes, that is correct.  You have answered my question really.   

I clearly need to take the 25% TfL’s to guarantee its value. 

ATM I’m still working and the pension pot amount is split across an HL SIPP and an occupational DC scheme with Standard Life which I intend to transfer across to the HL SIPP once I’ve left.


Any advice on how to house the £150k?  Will max ISAs this year and next year in April which leaves £110k to manage.

Thanks again.

You can put £50K in premium Bonds with  tax free returns .
You can also just use a normal savings account. You will probably pay some tax on the interest, but only maybe for one or two years.